Advisor’s Edge – Cross-border gift tax issues for Canadians
We are excited to announce that Jonah Ravel has recently contributed an article for Advisor’s Edge, which was published on February 8, 2019. His article titled “Cross-border gift tax issues for Canadians” provided an in-depth exploration into a wide variety of matters including Canadian tax treatment of gifts, Planning opportunity for Canadians moving to the U.S.: pre-exit gifting, U.S. gift tax overview, U.S. gift tax overview and exposure for snowbirds/other Canadians, and cross-border tax planning.
To read the article you can see it in part below, or click here to view it on the Advisor.ca website.
Cross-border gift tax issues for Canadians
February 8, 2019
With the end of the annual giving season and the beginning of tax season, it’s a good time for an overview of the cross-border tax impacts for Canadians. Affected clients include U.S. citizens and green-card holders living in Canada, snowbirds who own U.S. property, and Canadians planning to move to the U.S.
Since the CRA and IRS have different approaches to taxing gifts, clients may be unaware of their exposure to the U.S. transfer tax system, which includes gift tax, estate tax and the generation-skipping transfer tax.
This article will focus only on gift tax. Let’s begin with a brief refresher on Canada.
Canadian tax treatment of gifts
As Canadian advisors know, there’s no gift tax in Canada. Except for gifts from employers, the act of giving isn’t taxable to either the giver (donor) or the recipient (donee). That doesn’t mean, however, that it’s tax-neutral.
Making a gift of capital property, unlike a gift of cash, has tax consequences because transferring ownership of a capital asset is considered a disposition for Canadian tax purposes.
In Canada, if a father gives his son an appreciated property with a market value of $500,000 at the time of the gift and a cost basis of $300,000, a disposition occurs, triggering capital gains tax to the father on the $200,000 of unrealized appreciation. The son then acquires the property at a cost basis of the $500,000 market value.
MCA Cross Border Advisors, Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.>