17 April 1996 External T.I. 9608815 - ATTRIBUTION-GRANDPA INVESTS $ FOR GRANDCHILDREN

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

whether family member must report interest income earned on investments purchased by that family member

Position:

he must report the interest earned on the GICs purchased with money gifted by him to his grandchildren even though the interest is being placed in their accounts

Reasons:

		960881
XXXXXXXXXX	Sandra Short

April 17, 1996

Dear XXXXXXXXXX:

Re: Interest earned on GIC's invested in grandchildren's names

This is in reply to your letter of March 6, 1996 which queries whether you are required to include in your income the interest income which has been earned on General Interest Certificates (GICs) purchased in your grandchildren's names with funds deposited by you in "Getting There" savings accounts over a period of time. The interest which has been earned on the GICs is directed to be deposited back into the children's "Getting There" accounts.

The Income Tax Act contains a number of attribution rules intended to prevent a taxpayer from splitting his or her income among family members to reduce the total amount of tax payable. In your specific situation, these attribution rules require that the interest earned in the "Getting There" accounts on moneys deposited or gifted by you to your grandchildren and the interest which is earned by the GICs and deposited back into the grandchildren's savings accounts be reported by you for any year in which your grandchildren are under 18 years of age. This is true even though you do not receive any of this interest income directly.

We have enclosed a copy of Interpretation Bulletin IT-510 entitled "Transfers and Loans of Property made after May 22, 1985 to a Related Minor" which may be of assistance to you. As discussed in paragraph 1 of the Interpretation Bulletin, a related minor includes a person who is under 18 years of ages and who does not deal with an individual at arm's length. The Income Tax Act deems related persons not to deal with each other at arm's length. Related persons include individuals connected by blood relationship, marriage or adoption. As stated in paragraph 2 of the Bulletin, where an individual has transferred property (which by definition includes money) to a related minor, any income or loss from the property or any property substituted therefor is deemed to be income or loss of the individual for a taxation year unless the minor has attained the age of 18 years before the end of the year.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch