Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether a change in the legal title of a parent's investment account to joint tenancy of the parent and the parent's adult daughter constitutes a disposition.
Position: It depends on whether there has been a change in beneficial ownership.
Reasons: By virtue of paragraph (e) of the definition of "disposition" in subsection 248(1) of the Income Tax Act, a disposition does not include a transfer of property in which there is a change in the legal ownership without any change in the beneficial ownership.
XXXXXXXXXX 2001-010945
M. Eisner, CA
January 24, 2002
Dear XXXXXXXXXX:
Re: Joint Tenancy - Investments
This is in reply to your letter of November 5, 2001 concerning the ownership of investments.
In the circumstances of your situation, you have an investment account with a brokerage firm. The account is registered in your name. However, you now wish to change the ownership of the investment account to a joint tenancy of yourself and your adult daughter. It is our understanding that the change in the legal ownership of your investments to a joint tenancy of yourself and your daughter is intended to simplify your estate and to reduce probate fees.
You have asked about the tax consequences of changing your account to the joint tenancy arrangement.
As requested, we have considered your situation and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R4 (enclosed). Thus, our comments are of a general nature only.
The tax consequences of the above transactions depend on whether they result in a disposition of an interest in your investments to your daughter. Paragraph (e) of the definition of the term "disposition" in subsection 248(1) of the Income Tax Act (the "Act") generally provides that a disposition will not occur as a result of any transfer of property as a consequence of which there is no change in the beneficial ownership thereof. It is a question of fact whether there has been a change in the beneficial ownership. In this regard, reference should be made to paragraphs 2 to 5 of Interpretation Bulletin IT-437R "Ownership of Property (Principal Residence)" (enclosed) which generally discusses beneficial ownership.
If a change in beneficial ownership has not occurred so that there is no disposition for income tax purposes, your daughter would not be required to include any income or capital gains in income in respect of the investment properties.
On the other hand, if a change in beneficial ownership occurs as a result of the joint tenancy arrangement, you would be considered to have disposed of a 50% interest in each of the properties transferred into the joint tenancy, pursuant to the definition of "disposition" in subsection 248(1) of the Act. Pursuant to paragraph 69(1)(b) of the Act, your deemed proceeds of disposition in respect of the 50% interest in a property would be 50% of the fair market value of the property at the time of disposition. The adjusted cost base of a 50% interest in property disposed of by you would be equal to 50% of the adjusted cost base of the entire property pursuant to section 43 of the Act.
With respect to your daughter, paragraph 69(1)(c) of the Act provides that property acquired by way of gift is deemed to have been acquired at its fair market value. Accordingly, your daughter would acquire her 50% interest in each particular property at the amount equal to your deemed proceeds of disposition in respect of the 50% interest in the particular property. As a further comment, the attribution rules would not apply to any income earned on the transferred property as your daughter is an adult, such that following the transfer (i.e., the change in beneficial ownership), your daughter would have to declare her share of the income relating to the investments.
We trust that our comments are of assistance to you. If you need further assistance, you may contact your local Tax Services Office.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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