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Canadian Blue-chip Industrial Forum
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Gifting Stocks to Adult Children - Taxes - GlobeReproduced below is an interesting Q&A from The Globe and Mail. Q: I recently gifted stocks, which had a market value below my cost price, to three of my four adult children. I planned to use the loss to offset capital gains I had last year, or to offset future gains. The fourth child chose not to receive the shares, so I sold the same number of shares that the others received, again generating a capital loss, and I paid him the cash. When I told my accountant what I had done, she said that by giving the shares to the three children I could not use that loss for tax purposes, but I could do so where the stocks were sold and cash given to my son. However, my broker disagreed and said I could use the entire loss for tax purposes. Who’s right? A: Your broker is correct. When you transfer securities to an adult child, in the eyes of the Canada Revenue Agency you are considered to have disposed of the shares. For tax purposes, it’s the same as if you had sold the shares at their market value at the time of the transfer. If you have capital gains in the current year, you must first use the capital loss to offset those gains. Any remaining losses may be carried back up to three years or forward indefinitely to offset gains in those years. It seems your accountant may have been confusing the gifting of stocks to your adult children with a “superficial loss.” A superficial loss occurs when you dispose of securities at a loss and you or a person affiliated with you purchases the same securities within 30 calendar days before or after the sale (and continues to hold them 30 days after the sale). According to the CRA, an affiliated person includes a spouse or common-law partner, for example, or a corporation controlled by you or your spouse. If you transferred the losing shares to your spouse and elected to do so at their fair market value, this would also be considered a superficial loss because your spouse is an affiliated person. However, under CRA rules “the writer’s adult children are not affiliated persons,” said Dorothy Kelt of TaxTips.ca. The capital loss is therefore allowed, she said. |
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Msg # | Subject | Author | Recs | Date Posted |
67728 | Re: Gifting Stocks to Adult Children - Taxes - Globe | ArdeeL | 3 | 7/11/2020 12:01:54 PM |