What are the tax consequences of gifting Canadian stock market shares to my children?
When shares are gifted to your children, the transfer is assumed to have happened at fair market value by CRA and any capital gain on the deemed disposition is taxable in your hands.
When your children sell the shares in the future as adults, any capital gain on the sale is reported as income of the adult children. The adult children would use the market value of the shares when they were gifted to them as their cost for the capital gain calculation.
Income attribution would occur on any income the gifted shares generate (interest, dividend or capital gains income) as long as the children are under 18 years of age. Income attribution rules are a set of rules created by Canada Revenue Agency (CRA) that prevents investors from transferring assets between family members with the intention of avoiding taxes. In accordance with these attribution rules; for as long as your children are under 18, any interest or dividends they earn on the gifted shares will be taxed in your hands as would any capital gains on a sale of shares if they are under 18 years of age. Once the children are adults, the attribution rules no longer apply.
Gifting shares to your children has immediate tax consequences to you because there is a deemed disposition of the shares at the fair market value on the date you gift them. Gifting shares to your children does not provide you relief from the taxes due on any income the shares generate as long as the children are under 18. There still may be advantages to gifting shares to your children. If you are expecting the market value of the shares to increase in the future, now may be the time to gift them to your children to pay for University tuition later.
If you are considering gifting some Canadian stock market shares to your children and would like to discuss the future benefits, please contact us for help on this issue. for our help on this issue.Download a copy of this issue