ACTG 6710 Lecture Notes - Lecture 3: Tax Bracket, Property Income

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Attribution rules kick in to stop individuals from redistributing their income to their spouses or kids to pay lower taxes. For example: a husband who is in the high tax bracket owns shares of xyz corp. that pays dividends. He gifts the shares to his wife who has no other income. His does this thinking his wife will report future dividends under a lower tax bracket and save the family taxes: this is where attribution rules kick in. In short, cra will attribute the dividend income back to the husband and the husband will need to report this (and pay higher taxes due to him already being in the high tax bracket) Attribution applies in situation where property is transferred to: a spouse or common-law partner, children under the age of 18 who does not deal at arms-length with the transferor.

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