The attribution rules prevent income splitting by taxing income back to the person who transferred property to a spouse or minor child, rather than the lower-income recipient.
To stop families shifting investment income to lower-income members, the attribution rules tax certain income and gains back to the transferor. If you give or lend property to your spouse, income and capital gains on it are generally attributed back to you. Transfers to a minor child attribute income (though not capital gains) back to you.
There are legitimate ways around attribution, a properly structured prescribed-rate loan, contributions to a spouse's TFSA or RRSP, or gifts that a minor invests for capital gains, but they must follow specific rules. Attribution works alongside the TOSI rules that target dividend splitting through corporations.
You give your lower-income spouse $100,000 to invest. The interest and dividends it earns are attributed back to you and taxed at your higher rate, defeating the attempt to split the income.
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