Section 74.5

Subsection 74.5(1) - Transfers for fair market consideration

Administrative Policy

29 April 1994 T.I. 933662 (C.T.O. "Attribution Rules")

Where an individual (the transferee) has acquired an income-producing property from his spouse and given to the transferor a demand promissory...

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15 June 1992 T.I. 921368 (December 1992 Access Letter, p. 18, ¶C56-208)

No payment will be considered to occur pursuant to an agreement between the parties to the effect that interest on a promissory note will be...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt 38

Articles

Summerville, "Income Splitting may be Implemented by Transferring Residential Property to Spouse", Taxation of Executive Compensation and Retirement, December 1989/January 1990

In a 24 August 89 Technical Interpretation, RC passed favourably on a transaction whereby a high income spouse transfers to his low income spouse...

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Paragraph 74.5(1)(c)

Administrative Policy

23 June 2010 External T.I. 2010-0365581E5 F - Règles d'attribution de l'article 74.2

An individual disposed of capital property to a discretionary trust (whose beneficiaries were the individual and spouse and their children) in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) s. 75(2)(a)(i) is satisfied where a person transferring to a trust holds a capital interest in that trust 129

Subsection 74.5(2) - Loans for value

Administrative Policy

27 October 2020 CTF Roundtable Q. 11, 2020-0860981C6 - Refinancing Prescribed Rate Loans

An individual, who used a loan ("Loan 1") bearing interest at the prescribed rate (2%) to purchase securities for $100,000, now wishes to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(3) a 1% prescribed-rate loan can effectively replace a 2% loan if the latter loan is repaid with sales proceeds 193

10 June 2013 STEP Canada Roundtable, 2013-0480271C6 - Prescribed Rate Loan - 2013 STEP Roundtable Q 2

Can the interest rate on a loan to a spouse or other family member remain fixed at the current prescribed rate of 1% (so that there is no income...

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29 April 1994 External T.I. 9336625 F - Attribution Rules

An individual (the Transferee) acquired an income producing property from the Transferee’s spouse (the Transferor) in consideration for a demand...

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21 October 1991 T.I. (Tax Window, No. 12, p. 20, ¶1544)

Where a loan is made on September 30, 1991 with interest payable annually, the exemption will apply only if the interest due on September 30, 1992...

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19 July 1989 T.I. (Dec. 89 Access Letter, ¶1047)

No attribution of income will be made in the situation where father loans a newly-established trust with his minor children as beneficiaries the...

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79 C.R. - Q.5

Re criteria for a "genuine" loan.

Articles

Michael Goldberg, Vincent Didkovsky, "Refinancing Prescribed-Rate Loans Used for Income Splitting", Canadian Tax Focus, Vol. 10, No. 3, August 2020, p.2

Objective of refinancing loan to take advantage of lower prescribed rate (p. 2)

[M]any practitioners are likely to consider whether loans in...

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Paragraph 74.5(2)(b)

Administrative Policy

5 October 2018 APFF Financial Strategies and Instruments Roundtable Q. 10, 2018-0761551C6 F - Attribution rules and promissory note

On June 1, 2018, Mrs. B lent $500,000 to Mr. B at the prescribed rate of interest (2%) and, at the beginning of January 2019, Mr. B issued a...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt promissory note could not be issued as payment in context of income attribution rules 83

Subsection 74.5(3) - Spouses or common-law partners living apart

Administrative Policy

5 October 2012 Roundtable, 2012-0453201C6 F - Règles d'attribution- séparation & décès

Two common-law partners - within the meaning of s. 248(1) - separated on June 1, 2012 and started living separate and apart because of a breakdown...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) recapture from rental property is property income from that property 74

24 April 2006 External T.I. 2006-0166041E5 F - Transfert de biens entre époux séparés

In 1991, the spouses jointly purchased an immovable ("Immovable1" located in Canada which was intended to serve as their principal residence upon...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(4) s. 40(4) feeds principal residence claim of spouse after she acquires the co-ownership interest of her separated husband for $1 306

88 C.R. - Q.54

RC is aware that the provision may not be workable, because spouses typically are unable to settle the terms of their separation agreement in the...

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Paragraph 74.5(3)(a)

Administrative Policy

13 July 2005 External T.I. 2005-0131351E5 F - Séparation des conjoints de fait

Common-law partners (Monsieur and Madame) had a child of their union, and then lived separate and apart starting on April 15, 2004 (with Monsieur...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Common-Law Partner common-law partnership of couple with a child resumed the moment they resumed living together 109
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(3) - Paragraph 74.5(3)(b) capital gain is attributed to transferor common-law partner if the property is sold after they resumed their relationship 121

Paragraph 74.5(3)(b)

Administrative Policy

13 July 2005 External T.I. 2005-0131351E5 F - Séparation des conjoints de fait

Common-law partners (Monsieur and Madame) had a child of their union, and then lived separate and apart starting on April 15, 2004 (with Monsieur...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Common-Law Partner common-law partnership of couple with a child resumed the moment they resumed living together 109
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(3) - Paragraph 74.5(3)(a) attribution resumed when cohabitation resumed 204

27 January 2003 Internal T.I. 2002-0177197 F - ATTRIBUTION DU GAIN A UN CONJOINT SEPARE

On the breakdown of their marriage, a couple held various immovable properties in equal co-ownership. Pursuant to a separation agreement, each...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 56.1 - Subsection 56.1(4) - Support Amount net rental income on property received by separated spouse to fund support was rental income, not a support amount 94

Subsection 74.5(5)

Administrative Policy

6 October 2017 APFF Roundtable Q. 9, 2017-0709071C6 F - Corporate Attribution Rules

As a result of a previous estate freeze, A holds the voting freeze preferred shares of Opco (which is not a small business corporation) and a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.4 - Subsection 74.4(2) a second freeze transaction by a family trust could be viewed as an indirect transfer by the original freezor 416

Subsection 74.5(6)

Administrative Policy

10 June 2003 External T.I. 2003-0018915 F - Attribution - Transfers & Loans to Corp.

An individual transferred all the common shares of Cco (which, at no point, was a small business corporation) in a s. 85(1) rollover to a Newco...

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30 October 2002 Internal T.I. 2002-0134077 F - ATTRIBUTION DES GAINS EN CAPITAL

Two individuals transferred the shares they held of a particular company to their respective holding companies which, in turn, each disposed of a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.2 - Subsection 74.2(1) indirect transfer where individuals transfer shares to their Holdcos, who transfer such shares to the individuals’ respective spouses 122

Subsection 74.5(7) - Guarantees

Administrative Policy

86 C.R. - Q.44

RC will apply s. 74.5(7) where a third-party lender requires a spouse to guarantee a loan, except where s. 74.5(11) applies.

Subsection 74.5(11) - Artificial transactions

Cases

Swirsky v. The Queen, 2013 TCC 73, 2013 DTC 1078 [at 431], aff'd 2014 FCA 36

For creditor-proofing reasons, the taxpayer sold shares in a family real estate development company ("Torgan") to his wife, and used the sales...

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See Also

Mady v. The Queen, 2017 TCC 112

As a result of a rule change of the Dental College, it was necessary for ownership of all the voting common shares of the professional corporation...

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Words and Phrases
one of the main purposes
Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership wife and children did not acquire beneficial interest in shares the taxpayer was to transfer to them, under tax plan, until the share transfer occurred 263
Tax Topics - Income Tax Act - Section 86 - Subsection 86(2) family members did not acquire beneficial interest in new shares until after completion of s. 86 reorg 297
Tax Topics - General Concepts - Fair Market Value - Shares arm’s length sales price established FMV for closing-date internal transfer of same shares 482
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) - Subparagraph 69(1)(b)(i) contemporaneous arm’s length sale price established that shares previously transferred at undervalue 478
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) was not responsible under s. 163(2) for the unbeknownst sharp practice of his tax advisor 692
Tax Topics - General Concepts - Price Adjustment Clause no jurisdiction to comment on application of price adjustment clause where the affected taxpayers are not appellants 233

Administrative Policy

24 March 2014 External T.I. 2014-0519661E5 - Subsection 74.5(11) Attribution

A professional who formerly operated an unincorporated professional practice formed a corporation with him and his spouse each subscribing for...

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3 May 2001 External T.I. 2001-0069535 F - DEPENSE D'INTERET REGLES D'ATTRIBUTION

A rental apartment building, generating net income after depreciation, was transferred on an s. 73(1) rollover basis for its FMV to the taxpayer's...

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Articles

Kevyn Nightingale, "American Professionals in Canada", Canadian Tax Journal, (2017) 65:4, 893-937

Although there may be significant advantages for a Canadian-resident professional to incorporate, challenges arise where the professional (or a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1) 1543

Subsection 74.5(12)

Paragraph 74.5(12)(c)

Administrative Policy

23 October 2009 External T.I. 2009-0309861E5 F - Tax-free Savings Accounts

Mr. X makes the only contribution to the TFSA of his wife. After the resulting qualified investment has appreciated, she withdraws all (or a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(2) - Paragraph 146.2(2)(c) contribution by spouse causes cessation as TFSA 84