Income Splitting Strategies
Most income splitting plans either leave money on the table or fail on technical grounds. Custom-written for CPAs and tax practitioners advising business owners and high-net-worth families.
Hugh WoolleyCPA, CA, TEP
Marco JoticCPA, CGA, TEP
Learn the strategies that generate up to $37,000 in annual tax savings per family member and multiply the capital gains exemption for one-time savings of $330,000. This program delivers practical techniques for portfolio income, private company dividends, and pension splitting while showing you how to navigate attribution rules, TOSI provisions, and the common execution mistakes that trigger CRA challenges.
Business owners look at their families and see opportunity: "My spouse has no income. My adult children are in low brackets. Why am I paying top rate on everything when we could be splitting this income?"
The tax savings are real. Up to $37,000 per family member annually, repeating year after year. Capital gains exemption multiplication worth $330,000 per beneficiary. Even modest amounts like $50,000 produce substantial benefits because the rate differential is greatest in the lowest brackets. The problem is execution. Attribution rules send income back to you. TOSI catches private company dividends. Reversionary trust provisions under subsection 75(2) undo careful planning. Miss the January 30 interest payment deadline on your prescribed rate loan and the entire arrangement collapses.
This session shows you which strategies actually work and how to implement them without triggering the traps:
- Prescribed rate loans that avoid spousal attribution when properly documented and maintained
- Why capital gains on minors escape attribution but investment income does not
- TOSI planning for private company dividends using excluded shares and reasonableness tests
- Spousal RRSP withdrawals where only contributions from the past three years trigger attribution
- Converting RRSPs to RRIFs at any age to split income using the minimum amount exception
- Legitimate salary payments for services like director fees, administrative work, and technology assistance
The strategies vary dramatically based on three factors: the type of income being split, the age of family members receiving it, and the specific fact pattern. Portfolio income follows different rules than private company dividends. What works for adult children won't work for minors. A prescribed rate loan structured for investment income needs different documentation than a holding company arrangement for business dividends.
Every strategy includes the practical execution steps and compliance requirements that determine success or failure. You'll see why income that gets split must stay with the recipient and cannot be gifted back. You'll understand the case law where arrangements failed because beneficiaries returned funds to other family members. Most importantly, you'll learn which obstacles matter for which strategies. A reversionary trust issue that kills a portfolio income plan might be irrelevant for pension income splitting. The critical January 30 deadline for prescribed rate loans has no equivalent in RRIF planning. When you can save a client $37,000 per year through proper income splitting, they remember. This session shows you exactly how to make it happen.
This program will help you understand income splitting strategies and navigate attribution rules, TOSI provisions, and common execution mistakes. Learn at your own pace with instant access.
Income Splitting Strategies
Seminar Snapshot
Course Syllabus
Income Splitting Fundamentals and Benefits
Understanding the financial opportunity and measuring the tax savings potential
The Income Splitting Opportunity
- Moving income from high-rate to low-rate taxpayers to capture rate differentials
- Multiplying capital gains exemptions among family members for absolute savings
- Using income splitting to optimize alternate minimum tax (AMT) exemptions
- Maximum annual benefit of approximately $37,000 per person
- Capital gains exemption savings of approximately $330,000 per beneficiary
- How benefits are largest in lowest tax brackets
- The recurring nature of income splitting benefits versus one-time capital gains strategies
- Why even modest amounts ($50,000) produce substantial tax savings
Rate Differential Analysis
- Provincial variations in tax rate differentials and income splitting benefits
- How graduated tax rates create maximum savings at lower income levels
- Impact on spousal personal tax credits when implementing income splitting
- Understanding the diminishing benefits as recipient income increases
- Old age security (OAS) clawback considerations and income thresholds
- Planning around the $92,000 OAS threshold and $150,000 elimination point
Technical Attribution Rules and Obstacles
Navigating the technical challenges that can derail income splitting plans
Spousal Attribution Rules
- Sections 74.1 and 74.2: Attribution of income and gains between spouses
- When property transfers or loans to a spouse trigger attribution
- Capital gains versus income attribution in spousal arrangements
- How attribution applies to both positive returns and losses
- Strategies to avoid or work around spousal attribution
Minor Attribution and TOSI Rules
- Attribution of income (but not capital gains) to persons under 18
- Non-arm's length relationships and niece/nephew special rules
- Tax on split income (TOSI) provisions affecting private company arrangements
- Age thresholds and when attribution rules cease to apply
- Balancing attribution avoidance with TOSI compliance
Trust Attribution and Subsection 75(2)
- Reversionary trust provisions under subsection 75(2)
- When income and capital gains attribute back to property contributors
- Structural requirements to avoid triggering subsection 75(2)
- Documentation and trust deed language considerations
Prescribed Rate Loans and Subsection 56(4.1)
- Low-interest loan attribution for non-arm's length loans
- The January 30 annual interest payment requirement
- Income attribution assignment rules under subsection 56(4.1)
- Consequences of missing interest payment deadlines
- Proper documentation for prescribed rate loan arrangements
Portfolio Income Splitting Strategies
Specific techniques for splitting investment portfolio income
Prescribed Rate Loan Structures
- How prescribed rate loans overcome spousal attribution
- Current prescribed rate mechanics and historical rates
- Loan documentation requirements and execution steps
- Calculating and paying annual interest by January 30 deadline
- Using spousal loans for capital gains and dividend income
- Creating audit-proof documentation trails
Investment Holding Structures
- Family trust arrangements for portfolio income
- Using holding companies to facilitate income splitting
- Allocating different classes of investment income to family members
- Avoiding reversionary trust issues in investment structures
- When minors can receive capital gains without attribution
Capital Gains Exemption Multiplication
- Structuring share ownership to multiply the $1,250,000 exemption
- Using family trusts to allocate capital gains to multiple beneficiaries
- Avoiding TOSI on capital gains eligible for the exemption
- Timing considerations for crystallization strategies
- Integrating estate freeze techniques with exemption multiplication
Private Company Income Splitting
Navigating TOSI rules and implementing effective private company strategies
Dividend Splitting and TOSI Challenges
- How TOSI applies to private company dividends
- Excluded shares and excluded amounts under TOSI rules
- Age-based TOSI exceptions and planning opportunities
- Reasonable return tests for adult family members
- Documenting actual contributions to meet reasonableness tests
Holding Company Structures
- Using separate holding companies for family members
- Estate freeze with income splitting through multiple Holdcos
- Dividend flow-through strategies to low-rate shareholders
- Integration with capital gains exemption planning
- Avoiding common structural mistakes that trigger TOSI
Family Trust Strategies for Business Income
- Discretionary family trust structures for business families
- Trust distributions of dividends to family beneficiaries
- 21-year deemed disposition planning considerations
- When trusts make sense versus direct share ownership
- Coordinating trust planning with succession objectives
Pension Income and RRSP/RRIF Strategies
Maximizing income splitting through registered plans and pension income
Pension Income Splitting Elections
- Joint election to split up to 50% of eligible pension income
- What qualifies as eligible pension income for splitting purposes
- Age requirements and pension income eligibility
- How pension splitting works regardless of actual payment
- Optimizing pension splitting with other income sources
Spousal RRSP Contributions
- Making RRSP contributions to spousal plans
- Attribution rules on spousal RRSP withdrawals
- The three-year attribution rule (current year plus two preceding years)
- Strategic timing of contributions to minimize attribution
- Planning withdrawals for periods of low income (maternity leave, sabbaticals, home purchases)
- Calculating the attributed versus non-attributed portions of withdrawals
Spousal RRIF Strategies
- Converting spousal RRSPs to RRIFs for income splitting
- Minimum amount exception to spousal attribution
- No age restriction on RRSP-to-RRIF conversions
- Using RRIF minimum withdrawals for early income splitting
- Waiting three years after last contribution to avoid attribution
- Combining RRIF strategies with pension income splitting
Alternative Income Splitting Techniques
Often-overlooked opportunities and practical implementation strategies
Reasonable Salary for Actual Services
- Why small salary payments avoid attribution and TOSI
- Services that justify modest salary payments to family members
- Director fees for corporate board participation
- Administrative services: mail collection, banking, phone answering, appointment scheduling
- Technology assistance and software application support
- Market research and competitive intelligence activities
- Property inspection services
- Social and business relationship development activities
- Documenting services to support reasonableness
- Consequences when salary amounts are challenged
Practical Challenges and Execution
- Why income splitting arrangements must be genuine and sustainable
- The critical rule: Income must stay with the recipient
- Case law on distributions that are subsequently gifted back
- Documenting the arrangement to withstand CRA scrutiny
- Ongoing compliance requirements for prescribed rate loans
- Annual filing obligations and reporting requirements
- Adapting strategies as family circumstances change
Comprehensive Planning and Strategy Selection
- Tailoring income splitting strategies to specific fact patterns
- How types of income determine available strategies
- Age-based strategy selection (minors versus adults)
- Integrating multiple techniques for maximum benefit
- Balancing technical compliance with practical implementation
- Common mistakes and how to avoid them
- Red flags that trigger CRA challenges
- Building sustainable multi-year income splitting plans
Meet Your Presenters
Michael Cadesky
Michael Cadesky is the managing partner at Cadesky Tax and a committed contributor to the tax and accounting professions since 1980, earning the title of Fellow from CPA Ontario. He is a past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Michael is also the co-author of 11 books on tax subjects and the author or co-author of numerous papers and articles on Canadian and international taxation.
Marco Jotic
Marco is a Partner at Cadesky Tax with extensive expertise in trust and estate planning. As a Trust and Estate Practitioner and member of STEP, Marco brings practical experience in complex tax matters. He has been involved in tax education as a Tax Mentor for STEP Canada and facilitator for CPA Canada's In-Depth Tax Course. Marco has contributed to publications through the Canadian Tax Foundation and shares his knowledge with tax professionals across Canada.
Hugh Woolley
Hugh Woolley is an independent tax consultant who has taught income tax for over 30 years for many professional organizations. Hugh has written courses for CPA Canada and over 10 papers for the Canadian Tax Foundation and STEP Canada. From 1990–1992 he worked at the CRA's Rulings Directorate in Ottawa writing "butterfly" tax rulings. Hugh is a past Governor of the Canadian Tax Foundation..
FAQ
When can I access the course?
Immediately upon purchase. All course materials are available on-demand, allowing you to start learning right away.
How long do I have access?
You have 1-year all-access to the course materials. Watch and review the content as many times as you need, at your own pace.
Does the course provide CPD?
Yes. Upon completion, you will receive a verifiable CPD certificate indicating all instructional learning hours and required details.
What's included in the course?
Full video recording of the seminar, plus slides with detailed notes for your reference. Additional resources may be included.
Can I watch on any device?
Yes. Access the course from your computer, tablet, or phone — any device with internet access.