Have you ever received a gift of foreign stocks, bonds or other investments? Did you inherit these investments from an estate? Whether you received investments as a gift or inherited them from an estate the tax treatment is typically the same. However, you should be aware of the attribution rules if the gift is from certain family members.
Receiving The Gift
Normally when you receive a gift of stocks, bonds, or other investments you are considered to have acquired them at their fair market value at the time you received the gift and there is no immediate tax implications. The investments are considered to have been given from funds already taxed and do not need to be taxed again in your hands.
Investment Income & Gains
Any investment income you receive, such as interest and dividends will be included in your income and taxed in the year you receive it.
You will be taxed on any capital gains and losses but only when you sell the investment. Moreover, the gain or loss will be the difference between what you received from the sale (less any brokerage fees) and the value on the date you received the gift.
If the gift was of foreign investments and you are a resident of Canada, any investment income you receive is taxed in Canada and in your hands. The interest or dividends may be subject to a non-resident withholding tax, which is deducted automatically from the interest or dividends you receive.
On your taxes, you claim the full value (100%) of the income paid and you can claim the foreign withholding tax as a credit or deduction on your income tax return.
Attribution: Gifts From Your Spouse
If you received a gift of investments from your spouse, you are considered to have received the investment at your spouses original cost and there is no tax due to your spouse at the time of the gift. However, any investment income received on the gift, including capital gains will be included in your spouses’ income.
Attribution: Gifts From Adult Family Members
If you are a minor and have received a gift of investments from your parents, grand parents, aunts or uncles, you will be considered to have received the investments at their fair market value at the time of the gift. The person giving you the investments will have to claim and capital gains and losses on their income tax at the time of the gift. Similarly, you are taxed on any gains and losses from the time of the gift to when you sell the investments.
Unfortunately, the person providing you the gift must still pay tax on any investment income (other than capital gains and losses) until you are of the age of majority.
Receiving a gift or an inheritance can be beneficial to you. You will not pay tax on the receipt of the gift itself and you may receive income from the investments and the income may be taxed in your hands. In addition, if the gift is from certain family members, they may still be responsible for all or a portion of the taxes.