January 2017 Newsletter

For the past 10 years, you have been able to “split” up to 50% of your eligible pension income with your spouse or common-law partner for income tax purposes. The amount that you split with your spouse for a particular year is called the “split pension amount”. The mechanics of the pension split are described below.

How it works

In addition to splitting pension income as discussed above (which can include splitting your RRSP annuity income), there is another method of effectively splitting income using your RRSP. This requires some long-term planning.

There are special rules that apply under the Income Act if you dispose of, or acquire property from, a non-arm’s length person.

Personal trusts are set up for various purposes. Often, they are set up by a “settlor” who puts property in trust for an individual or individuals, known as the “beneficiaries” of the trust. For income tax purposes, a trust is considered a separate person, and is a "taxpayer" that may be subject to tax, tax return filing obligations, and other requirements under the Income Tax Act.

Supreme court of canada rules on rectification

A taxpayer can apply to rectify a transaction that occurred pursuant to a legal agreement or document, but that does not reflect the actual intended transaction. Typically, the application will be made where the transaction that occurred resulted in adverse consequences relative to what the taxpayer intended. For example, in the 2000 Juliar case, the Ontario Court of Appeal allowed rectification of the taxpayers' transactions because the taxpayers had a common and continuing intention to transfer certain shares on a tax-free basis, contrary to the actual transfer of shares that would have resulted in tax payable.