Attribution rules

The attribution rules can treat income from property a person gives or lends to certain family members as that person’s own income. The CRA says special rules apply to income from property, including shares, that one family member lends or transfers to another, including through a trust. They matter where an owner plans to transfer business shares to a spouse or child.

What the rules cover

Section 74.1 applies where an individual has transferred or lent property, directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of certain persons. Section 74.5 sets out exceptions. An archived CRA bulletin on transfers to a related minor says subsection 74.1(2) does not attribute business income, even when the business uses property obtained from the transferor. Because the bulletin is archived, treat it as background.

What to ask

• Who is the recipient and how are they related to the transferor?
• Was the property transferred, lent, or sold, and on what terms?
• Does an exception in section 74.5 apply to these facts?

These rules sit alongside tax on split income and the answer on discretionary family trusts.