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Gifting TSLA shares to family members / minor children - Canadian Edition

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Jeeps17

Cath Jockey in a P85
Mar 17, 2012
1,040
505
Montreal, Canada
Hello everyone,

I came across an interesting thread in the investing forums about available options to gift TSLA shares to family members while minimizing their tax burden (with focus on minor children who can potentially benefit from a very long investment horizon). That thread was US-centric, and I did not want to hijack it, so am creating a Canadian version.

If anyone has suggestions for a viable strategy(ies) north of the border, post away !

Thanks in advance.

JP
 
You could ask the CRA or an accountant, but to the best of my knowledge, either a change of ownership or a death of the owner within Canadian tax law is considered to be a disposition of assets and is thus a taxable event. The capital gains on the disposition would be based on the adjusted cost base and would amount to 50% of the gain and your effective tax rate in the year the disposition was triggered.

Gifts are not taxable in the hands of the recipient.

Capital gains are very tax efficient for the receiver so I’d strongly recommend against trying to game the system. Paying more tax means you are ahead…
 
You could ask the CRA or an accountant, but to the best of my knowledge, either a change of ownership or a death of the owner within Canadian tax law is considered to be a disposition of assets and is thus a taxable event. The capital gains on the disposition would be based on the adjusted cost base and would amount to 50% of the gain and your effective tax rate in the year the disposition was triggered.

Gifts are not taxable in the hands of the recipient.

Capital gains are very tax efficient for the receiver so I’d strongly recommend against trying to game the system. Paying more tax means you are ahead…

My query was not to find ways to game the system, but rather a tax-efficient way of setting up investments for young family members (as close to a win-win as possible). There seem to be some financial mechanisms to do this (within limits) in the USA, I was curious as to whether anyone knew of any in Canada.

I will have to check with my accountant as to what (if any) means are available to set up investment accounts for minors.

If you are giving the shares to kids you might want to put them into a RESP so that any gains will not be taxable, and then you also may get a government contribution as well.

Good thought, RESPs have a maximum contribution limit, but someone starting one should definitely consider this. Note that once the children start withdrawing, they will be taxed (at their presumably much lower fiscal bracket).

Thank you for your replies !

JP
 
Hello everyone,

I came across an interesting thread in the investing forums about available options to gift TSLA shares to family members while minimizing their tax burden (with focus on minor children who can potentially benefit from a very long investment horizon). That thread was US-centric, and I did not want to hijack it, so am creating a Canadian version.

If anyone has suggestions for a viable strategy(ies) north of the border, post away !

Thanks in advance.

JP
You will want to look at CRA’s “attribution rules” for gifts to minors. The short version is that CRA by default will tax any income from the investments as though they are in your hands, but capital gains should be taxed in the hands of the recipient.

I’m just a random dude on the internet, so find a good accountant or tax lawyer to advise you on this. Here is one article that might get you started.

Family gifts in Canada