Cash gifts on Canadian tax return.

February 19, 2010 6:45 AM

Is this money considered a gift or income, and how do I claim it on my Canadian income tax return?

In the early months of 2009, my awesome parents gave me about $4,000 for tuition and living expenses so I wouldn't have to get student loans in my last semester of school. When I finished school in August, they gave me about $7,000 to pay down some of my student loan. This money was given to me and I am not expected to pay it back.

Complicating factor: The cheques for each were issued to me through my father's company (he is self-employed) so I am curious about how I would go about reporting this on my tax return. Both were issued to me as regular old cheques, not payroll cheques (no source deductions were taken out, etc). I am not and have never been an employee of his company.

So my question is - is this considered a gift or taxable income? How do I go about claiming it?

We will get the chance to ask Dad's accountant about this, but probably not for a couple more weeks, and I'm trying to get a rough idea of what my refund will be if I have to claim this as income and pay source deductions on it. As the questions says, I'm in Canada. Thanks!

posted by anonymous to work & money (5 answers total)

Here's the web site for Canada's revenue agency: http://www.cra-arc.gc.ca/stmp-eng.html

They should have an answer to this question, if no one here does.
posted by dfriedman at 6:53 AM on February 19, 2010

IANAA, but my father is also self employed, and has written cheques out of that account for me.

The question I have is how will your father account for the funds on *his company's* books? If they show up as payment for services or anything payroll related, it's income. if it's payment for services, you may be on the hook for GST as well.
posted by WinnipegDragon at 6:53 AM on February 19, 2010 [1 favorite]

I am not your accountant, but in the US, personal checks written out of the business account would be counted as a personal draw or loan to the owner, not a business expense. As long as you never did any unpaid work for his company and he isn't under the impression that you were being paid for some specific good or service, I'm 99% sure that this is a gift, as I can't imagine any accounting practice in which this would be considered a business expense.

But if you want to be absolutely sure, ask your dad, "Dad, you're not deducting this money as a business expense, are you?"
posted by larkspur at 7:20 AM on February 19, 2010

My parents have given me similar sized sums for school related expenses in the past, although not out of a business-type account. I'm also in Canada. I've never reported such gifts on my tax return. Another note is that, generally, scholarships and bursaries are not taxable.

You're situation may vary from mine though.
posted by Diplodocus at 10:33 AM on February 19, 2010

I would check this out on CRA, but, as a parent, I'm vaguely aware that I can gift up to $10k a year to each of my children without them needing to pay taxes. I suspect you are in the same boat. Check it out with CR.
posted by acoutu at 8:27 PM on February 19, 2010