Is gifted money to spouse considered a taxable income? | Page 2 | General financial discussion | Discussion forum

pooreva, you're right, in your example. But I think GICs can be purchased jointly.

And I don't think this stuff matters for 95% of folks, CRA would never pick it up or even much care unless it's a large amount. But say wealthy A has had lots of interest income and all of a sudden spouse B, who previously showed little income, has lots (or else it's newly in a joint account with B as the primary SIN and thus is now starting to report it) and A now has little, then it might catch CRA's attention and they'll want to find out how come B's up while A's down. I think the burden of proof will then be on A & B to explain, and then whatever tax rules apply will kick in.

Bill said
… Are you aware of any cases that deal with interest deductibility re. loans taken out to earn bank account interest, or even buying GICs or similar interest bearing instruments? (I'm familiar with the clarity re dividend income.) Or even any explicit references in CRA material that make it clear? I'd be very interested, thanks.

Line 22100 (Carrying charges and interest expenses) instructions include interest paid to earn interest:

Claim the following carrying charges and interest you paid to earn income from investments:
…

• most interest you pay on money you borrow for investment purposes but generally only if you use it to try to earn investment income, including interest and dividends. However, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid

…

Income Tax Folio S3-F6-C1, Interest Deductibility mentions Supreme Court case Ludco Enterprises Ltd. et al. v The Queen.

In 1.27 of the folio, CRA notes the qualifying income is any "amount that would come into income for taxation purposes" and not necessarily income that is or would be sufficient to overcome the interest paid/deducted:

Income
1.27 It is a further requirement of subparagraph 20(1)(c)(i) that to be deducted, interest be payable on borrowed money used for the purpose of earning income from a business or property. The interpretation of the term income was addressed in Ludco as follows:

... [I]t is clear that "income" in s. 20(1)(c)(i) refers to income generally, that is, an amount that would come into income for taxation purposes, not just net income.

The court also said:

The plain meaning of s. 20(1)(c)(i) does not support an interpretation of "income" as the equivalent of "profit" or "net income".... Therefore, absent a sham or window dressing or similar vitiating circumstances, courts should not be concerned with the sufficiency of the income expected or received.

Accounting firm BDO Canada writes in Continue to deduct interest on your investment loan the following about interest paid on borrowings to earn interest or dividends:

Where you have borrowed to purchase investments that pay interest or dividends, remember that you can continue to deduct interest on the loan even if that investment is sold for a loss. …

Bill said
pooreva, technically, by the book, the interest has to be reported by whoever's money it is, regardless of the slip. So, for example, if the money came from a couple's joint money, i.e. money that each had equally contributed, then, by the book, each should report 50%. That's the rule.

The real question is does CRA care about the rule. My experience with joint bank accounts has been that CRA's accepted whatever I've reported, though I've tried to head off any questions. I've sometimes sent along a note explaining how I was splitting it and why, regardless of what the SIN on the slip was, I never, ever, heard back from them, they seemed ok with it. They probably checked the other joint owner, saw the rest of it being reported there, and were happy, amounts weren't in the millions and tax rates were not more than one level different between us. For some years now I just report based on SIN on the slip, too much bother to send note, do calculations, etc, and they again seem completely fine with that, zero queries from them.  

Exactly!

But from what I have heard....hearsay.....over the years your interest split must be the same every year on your joint investments.

Also I have said this before. And perhaps this option only works for the elderly. Do your joint interest at 50-50 and then do your income splitting. Then do your joint interest at 100-0 or 30-70 and then do your income splitting. Your tax payable or refund will be same. I would love to meet the mathematician that formulated our tax forms.

Also a relative said to me that at my income level I would get back all of my medical expenses. Firstly this person was wrong in thinking we are of a low income. And some totally overlook that your RRSP and RRIF is income when cashed in.
So just to understand that your medical expenses work like this.
Enter your eligible medical expenses
Minus the lower of $2352 or 3% of your net income
Equals your tax credit if a positive number
Then times that positive number by 15%
That amount is now deducted from your federal taxes payable

So medical expenses have a deductible amount of say $0 to $2352 and then after that deductible you only receive 15% back.

Also any one who claims over $5000, expect to be audited and be prepared to provide authentic official receipts and/or Doctors certificates.

BillieBob said

I claimed just over $11,000 in medical expenses on my 2019 return. I certainly hope I don't have to suffer the pain of a tax audit as well.  

I have always done my own taxes on a software program. I had a lot of dental work done one year. When I did the entries somewhere along the line the software warned me of a likely audit due to claiming over $5,000. And then I received the request to provide documentation. I forget if it was mailed or emailed. So all I had to do was make all my receipts into PDF and they you send the info back. If I recall you do it though your "My Account" or though the CRA website and they give you an identity code along with it. I had one questionable receipt that I wrote an explanation on. A short while after I was informed that all was ok.

So the fears of sitting sweating in a room being in crossfire with numerous CRA Super Accountants and a pile of 10 years worth of paperwork doesn't happen.

GICinvestor said

I have always done my own taxes on a software program. I had a lot of dental work done one year. When I did the entries somewhere along the line the software warned me of a likely audit due to claiming over $5,000. And then I received the request to provide documentation. I forget if it was mailed or emailed. So all I had to do was make all my receipts into PDF and they you send the info back. If I recall you do it though your "My Account" or though the CRA website and they give you an identity code along with it. I had one questionable receipt that I wrote an explanation on. A short while after I was informed that all was ok.

So the fears of sitting sweating in a room being in crossfire with numerous CRA Super Accountants and a pile of 10 years worth of paperwork doesn't happen.  

A small portion of my expenses were dental but most are related to cancer treatments and medications, and include mileage expenses, etc. for daily travel over 7 weeks to a major city for treatments so receipts for some things will be difficult to obtain. I did keep a mileage log though.

I have received my Notice of Assessment but I'm guessing that a request for receipts can still happen after that.

BillieBob, re mileage log, etc, here's a link to CRA Guide RC4065, Medical Expenses (scroll up to top), it has a section on Travel Expenses and in that section there's another link to options re how to calculate travel expenses, etc. Maybe you already know.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065/medical-expenses-2016.html#whtdcmnts