Gift Tax In Canada

October 13, 2010Canada Taxby EconomyWatch


Property or money is usually gifted to someone at ones own will . The one who is gifting does not expect anything in return. As per norms of the Canadian government, if an individual gifted securities, which are publicly listed after 1st May, 2006, the inclusion rate for capital gains is zero. Any donation would be considered taxable under the Income Tax Act provided the donation has been made with the purpose of gifting.

Gift tax in Canada is imposed depending on the following factors:
  • If the recipient of the gift is the Canadian government (it may be territorial or provincial), a charitable organization.
  • If the articles comprises of land, which is sensitive environmentally.
  • The Gift tax in Canada would also depend on the nature of the gift, if the gift is a property. It would decide whether the gift is a business inventory, personal property, which is listed or capital property.

    One can claim part of the “eligible amount” of the gift or the whole of it. However, there is one limitation and that is the claim cannot exceed 75 percent of the net income of the donor or the individual who is gifting.
    Gifts, which are non qualifying:
    In the event when gifts like corporate shares and gifts of similar nature are made, special norms are applied to them. Non qualifying gifts may also include securities, which are held by the donor like securities, which are listed on stock exchange. Financial institution deposits are also included in this category.
    Gifts donated to the Canadian government:
    A donor is eligible to claim tax credit on eligible amount of the gift, he has made to the Canadian government. The government may be territorial or provincial. However, gifts made to the government, in no way would include contributions to the parties politically involved. If the donor made donations to the government prior to 19th February, 1997, the amount on which tax would be calculated would not be restricted to 75 percent.
    Filing for a gift tax in Canada for a person who has expired:
    Whenever a donor prepares to file return of gift tax in Canada, for a person who is no more, claim on that eligible amount can be made, which the deceased paid in the year he died.
    Capital property:Capital property includes any property, which when sold would lead to capital loss or capital gain. One purchases capital property for the purpose of investments or for earning income. However, falling outside the purview of the capital property are inventories or assets pertaining to any business. The following list gives details of different types of capital property:
  • Buildings or apartments, landed property, machinery used in a business.
  • Bonds, units pertaining to mutual funds, stocks: These securities are also included in the category of capital property.
  • Huts or CottagesCapital gain earned during the tenure of possession by the donor needs to be informed. Conversely, capital loss ought to be reported as well. This information is necessary at the time of filing returns of gift tax in Canada. Gifts in Kind:If gifts are in form other than cash, it may be referred to as “gifts in kind”. Gifts in kind may include gifting of capital property. Capital property gifted may include property, which is depreciable or property being used personally. The second type is categorized in “personal property”. Given below are some factors, required to be kept in mind while donating property:
  • If one decides to gift property and the donor of the property has enjoyed capital gain from the time the property was owned by the donor, then capital gain would be taxable.
  • Different tax norms are applicable depending on the status of the donor. The donor may be a collector, a dealer, an artist or anything under the sun.
  • Gift tax in Canada also takes into consideration the status of the recipient. Whether, the property is being donated to an art gallery or a museum solely would determine the gift tax in Canada.

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