Will this be an issue with CRA? | Tax Free Savings Accounts | Discussion forum

Yas said

Hello Savers,

My spouse doesn't have an income but we would like to open a TFSA for her (I already have one). I am wondering, if we open this account and contribute fund there, should she indicate that as income or mention that on any fields when she does the Income Tax by the end of year? Will the CRA question her how and where did that money come from? And if she tells them it's from my husband would that affect the income tax return that I can claim for her (as spouse)?

Please let me know if this is unclear or you need more clarifications.

Cheers,
Yas

Here is your answer towards the bottom.

http://www.tfsa.gc.ca/

It is clear that you CAN do it. It would be like giving your wife an annual gift for which she decided to invest. It is NOT tax deductible for you or her and it is now in her name only but likely she will make you the beneficiary. This income is not able to be part of a claw back, which is a good thing. Go for it!! AND you can contribute for past years too as
per here http://www.cra-arc.gc.ca/E/pbg.....43-13e.pdf .
I am currently converting my RRSP's to TFSA's and removing all of my RRSP from being considered income over the next 10 years.

Regards Peter

kanaka said

[snip]

It is clear that you CAN do it.

[snip]

I believe there could be an issue with the CRA Income Attribution rules. I am not sure of the exact treatment but the rule is there to prevent one spouse with $100,000 in investments giving the other spouse $50,000 of those investments and then both paying lower taxes on the income from those investments. This assumes that the taxes on the investment income from $100k is more than the taxes on the investment income from $50k for two people.

The OP is likely OK due to the relatively small amount, but it might be prudent to know the ruless before walking blindly into a problem.

Greg

Deb said

Peter,
Just wondering how you are moving all your RRSPs to TFSAs, (which sounds like an excellent idea by the way!).
Aren't we limited to $25,500 total TFSA contributions up to this year? $5000 for 2009-2012 plus $5500 for 2013.
Is there a way to move more than that from an RRSP into a TFSA?

BTW, I appreciate all the useful links you have been including in your messages!

Thanks,
Deb

Deb I have had 3 investment advisors over the last 25 years.....1 good ... 2 crooks. Currently the crook I have is on a 3 year phase out plan. If you want to know why I call them crooks, let me know. I should not say crook but say they have not had me in their best interest while they line their pockets. I am retired and have a pension that is more than my wife's, so income splitting is very handy. I see the need to remove my RRSP funds out of the registered category for two reasons, higher tax at 71 and ensure there is no RRSP or RRIF withdrawals that will be treated as income in my later years thus loosing my money to clawbacks JUST IN CASE I fall into that category. We have begun to withdraw amounts not over 15000 each and MUST stay in the lowest tax bracket. We have both maxed out on our TFSA's from day one from funds that we had saved over the years. We are now going to treat our TFSA funds as RRSP for funds required later in life. So starting this year I withdrew 15000, paid 20% tax leaving 12000 and bought this years TFSA minus 5500 leaving 6500 and used and then used the remaining 6500 to reallocate RRSP funds to TFSA. It will take 3 years to complete once that is done I will remove 15000 minus 3000 for tax minus 5500 for TFSA and put the rest in GIC and/or ETF's to minimize income tax on capital gains and dividends vs interest of which the latter will also be considered for funds required for later in life (xRRSP). Make sense? Questions?

Regards Peter

Ps Since I am retired and do have room for RRSP I have no plans to buy RRSP.
Pps It is all on paper (excel) and there are no financial transfers being performed other than the RRSP withdrawals.
Ppps Better word that I should have used ..... Reallocate.....

dennis said

GS said

kanaka said

[snip]

It is clear that you CAN do it.

[snip]

I believe there could be an issue with the CRA Income Attribution rules. I am not sure of the exact treatment but the rule is there to prevent one spouse with $100,000 in investments giving the other spouse $50,000 of those investments and then both paying lower taxes on the income from those investments. This assumes that the taxes on the investment income from $100k is more than the taxes on the investment income from $50k for two people.

The OP is likely OK due to the relatively small amount, but it might be prudent to know the ruless before walking blindly into a problem.

Greg

As far as I know, the "Attribution rules" does not apply to TFSA for spouse just like Spousal RRSP.

Here is the answer, it is NOT an issue.

http://www.ica.bc.ca/kb.php3?pageid=4240

Yas said

Thanks a lot for all the replies and feedbacks. Special thanks to kanaka.

I just have one more question, should my spouce declare the transferred TFSA as an income? If that's the case I won't be able to claim the $10,822 * 15% in Line 303 - Spouse or common-law partner amount in Income Tax Return which means lose of money instead of earning.

Appreciate your feedback and help

http://www.tdcanadatrust.com/p.....fsa-qa.jsp

I would say no you do not.