Finance Tax matters If you’re wondering about what the tax implications of all this giving may be, good for you for thinking of it, because giving away substantial sums can run afoul of sometimes-confusing rules if you’re not careful to follow those rules. Unlike our cousins to the south, there is no “gift tax” in Canada. Most of the time, receivers don’t need to report a gift as income on their tax return, as long as the gift wasn’t in exchange for any products or services. Of course, if the recipient resides in another country, or if you’re giving away assets domiciled in another country, then that country’s rules might be very different – make sure to check with a tax professional to be sure. For the giver, however, the tax implications of giving can be more complicated. While there is technically no limit to the amount that you can give in a year (or in a lifetime), depending on what assets you give, there may be tax consequences to consider. Generally, if the gift is simply cash, then there are no tax consequences at all. But if the gift is an asset (a car which elderly parents can’t use anymore; the family cottage; a valuable painting; financial assets such as stocks and bonds; etc.), the CRA will consider the gift to be a deemed disposition and the taxman will usually want his share of any gains which you’ve accrued through the years (although there are some exceptions when giving to a spouse). Giving appreciated assets to a charity usually generates a tax deduction, which can help offset that tax, at least in part. Giving to minor children has some very specific tax rules; if you’re thinking about it, make sure that you’re aware of these rules. Very generally, if you make a gift of an income-producing asset to a minor child (stocks or bonds, let’s say, or perhaps a rental condo), then the income from that property will usually be attributed back to you, no matter who ends up actually spending that income. Remember, the rules covering the tax consequences of giving can easily comprise an entire book, and the points above are only the most rudimentary overview of what you need to know. But the bottom line comes down to this: don’t assume that you can simply channel cash and assets to friends and families without tax consequences. Seek out an opinion from an experienced tax professional and find out for sure. A word about family For the giver, the act of giving comes from a place of generosity; it’s an incredibly noble goal to donate something of yours to improve the lives of others, and it typically brings much happiness to the giver to do so. But for the receiver (or those related to them), the emotions aren’t quite so simple. Here’s the thing: money and wealth are emotionally charged topics and giving money away can trigger unexpected reactions that can have a long-term impact on personal relationships. Gifts can sometimes create a whole host of tension and expectations, particularly if you’re gifting money to one family member and not others, or when the purpose or meaning of the gift hasn’t been communicated clearly. Gifts can also change behaviour: regular support can sometimes lead family members to expect that money regularly, which may distort financial decision-making and lead to resentment if that support changes or stops. Ultimately, the decision to give is a very personal one, and no one but you should tell you how much to give, and to whom, and when. But before you make any gift, it’s a good idea to think a bit about how that gift might be perceived – by the recipient, as well as by those around them. If you feel that your generosity (no matter how well-intended) could lead to bad feelings, resentment or negative impact on your relationships with family, it’s wise to proceed with caution. At the very least, you’ll want to take the time to communicate to everyone about your purpose. While others may not share your views, honest, open communication gives you a better chance of preventing such differences from being the start of a permanent rift within the family. The fact is, we expend a lot of effort learning how to accumulate and build wealth, but precious little time thinking about how best to give it away. And that’s too bad, because giving can be one of the most rewarding acts that we can take with our wealth. But it’s even more rewarding when you do it with intention and purpose. Spending a little time thinking about giving before you actually do it will make the process – and the results – much more satisfying. CSANews | WINTER 2024 | 29
RkJQdWJsaXNoZXIy MzMzNzMx