Question: Can you transfer stocks to a spouse so that the spouse could take advantage of the spouse’s tax losses from previous years (assuming that that the stocks will go higher in the future)? The stocks being transferred are at the price they were purchased.
Income Splitting Rules
When you transfer, give, or lend property to your spouse, the property is transferred at its original cost base. There are no immediate tax consequences at the time of the transfer.
To prevent married couples from splitting income by transferring property from a high-income spouse to a lower-income spouse, there are income tax attribution rules. Under the attribution rules any income received from the transferred property is taxed in the hands of the original spouse as are any capital gains or losses.
Transfer Of Stocks At Cost
The stocks transferred to your spouse would automatically transfer at its original cost base. When they are subsequently sold by your spouse the capital gain would be your. Therefore, it’s not possible to transfer the stocks to your spouse to take advantage of their losses carried forward.
Fair Market Value Transfer
If your spouse purchases the stocks from you at their fair market value and pays for the stocks with his or her own money (or if you lend your spouse the money to purchase the stocks) and waits 31 days before selling them, then the spouses losses may be used to offset some of the gains.
This may not be desirable since the transfer would result in an immediate capital gain at the time of transfer, which is really what we are trying to avoid in the first place!
There is little anyone could do to use losses carried forward by a spouse or other family member.
Suggestions or Questions
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