Savings & Investments

Can I Split My Capital Gain With My Spouse?

The answer to the question of whether or not you can split your capital gain with your spouse depends on whether or not you shared in the purchase of the investment in the first place and how much your spouse contributed.

You can’t just split a capital gain 50/50 with your spouse.

This is because of the Attribution Rules, tax rules which have been especially created to limit income splitting (shifting income from a family member with a higher income to a family member with a lower income to reduce the overall tax a family has to pay).

Simply stated, the Attribution Rules say that when you transfer or loan property to your spouse (or to a trust in which your spouse has a beneficial interest), any income or loss from that property is deemed to be yours for a taxation year.

So when you transfer or loan a property to your spouse, the Attribution Rules attribute the income from the property back to the individual who may have transferred or loaned the property to split income – namely, you. And as the owner, you are the person accountable for any capital gain or loss on the sale of the property.

You can read the details about the Attribution Rules in the Canada Revenue Agency’s IT511R – Interspousal and Certain Other Transfers and Loans of Property.

The general rule, then, is that you declare your capital gain based on the proportion of your investment at the time you made the investment.

For example, if you bought 200 shares of stock and then sold them, realizing a capital gain, all of the capital gain would have to be declared on your income tax because you are the one and only person who paid for the stock.

If, on the other hand, you and your spouse bought 200 shares of stock, and you paid 75 percent of the purchase price while your spouse paid 25 percent of the purchase price, you would declare 75 percent of the capital gain on your income tax and your spouse would claim the other 25 percent.

Having a joint bank account doesn’t affect the rule in the slightest; the capital gain still has to be split depending on the original contribution of each spouse.

Splitting the income from a capital gain then, is possible, as long as you have the foresight to think ahead to your taxes when you decide to purchase capital property such as stocks or real estate and arrange the split of the purchase price accordingly.

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