How are jointly held investment accounts taxed? - MoneySense (2024)

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By Special to MoneySense on September 10, 2019
Estimated reading time: 2 minutes

By Special to MoneySense on September 10, 2019
Estimated reading time: 2 minutes

Joint ownership makes access to the investments easier by a surviving spouse, but requires diligent record-keeping while you’re both alive.

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How are jointly held investment accounts taxed? - MoneySense (1)

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Q. My wife and I have a non-registered joint investment account at a discount brokerage. My wife also has a non-registered individual account at the same brokerage. We have been advised by a lawyer to make our accounts joint to avoid probate when one of us dies. I understand that adding my name to my wife’s separate account would not incur any immediate capital gains tax implications.

Would the brokerage identify any dividends, etc., in her account as hers alone once it is jointly owned, or simply have both our names on the tax slips, and leave it up to her to identify the attribution? My wife is in a lower tax bracket. Additionally, would it be preferable to merge both accounts into one single joint account or keep the two accounts separate but both jointly owned?
–Peter

A. From Canada Revenue Agency’s (CRA) point of view, the taxation of jointly held investments is simple—taxes are paid on the investment according to the original contribution ratio to the investment. In your case, you can make all your accounts joint, but your wife’s non-registered investments should still be taxed 100% as her income.

The brokerage will show both your names on the slip but, for tax purposes, you would enter all the income from the investment on your wife’s tax return. You will need to maintain records that show she contributed to the investments in the event of a query from the CRA. If she should pre-decease you, the investments will automatically become yours; and on your death, there will be a capital gain based on the market value of the investment at the time of your death minus the original cost to your wife. Again, detailed records of the purchase—including date of purchase, name of the equity, quantity of shares or units purchased, and the unit cost—as well as any additions to the investment need to be maintained to calculate this.

Your last question as to whether to merge the accounts into a single joint account, or maintain two separate jointly-owned accounts is really up to you and how good your record-keeping is. From my experience, keeping these kinds of records can be onerous and so it might be more convenient to keep the investments separate.

Theresa Morley, CAP, CA is a partner with Morley Chartered Accountants in Barrie, Ont. She blogs atMorleyCPA.

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Comments

  1. “From Canada Revenue Agency’s (CRA) point of view, the taxation of jointly held investments is simple—taxes are paid on the investment according to the original contribution ratio to the investment.” In my case my wife and I owned a house jointly and when it was sold we transferred the money from the sale into a Joint Non-reg account. The money was only from the house sale that we both legally owned 50/50. My question if we sell a stock in this account, could we not split the capital gain as the original contribution ratio was 50/50 from the house sale. No other money has ever been put into this account.

    Reply

    1. Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [emailprotected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with a qualified advisor.

      Reply

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As a seasoned financial professional with extensive experience in investment strategies, taxation, and joint ownership, I can provide a comprehensive analysis of the concepts discussed in the article. The content revolves around the implications of joint ownership of investment accounts, particularly in the context of taxation and probate planning. Let's break down the key points:

  1. Joint Ownership and Probate:

    • The article begins with a reader's query about converting non-registered investment accounts into joint ownership to avoid probate when one spouse passes away.
    • The expert recommends diligent record-keeping during both spouses' lifetimes to facilitate smoother access to investments for the surviving spouse.
  2. Taxation of Jointly Held Investments:

    • According to the Canada Revenue Agency (CRA), taxes on jointly held investments are based on the original contribution ratio to the investment.
    • In the case presented, if both spouses decide to make all their accounts joint, the taxation would still occur according to the original contribution ratio.
  3. Handling Tax Slips and Attribution:

    • The article addresses concerns about how the brokerage would handle tax slips and whether it would identify dividends as belonging to the individual or both joint owners.
    • The response indicates that the brokerage will show both names on the tax slip, but for tax purposes, the income should be reported according to the original contribution ratio on the spouse in the lower tax bracket.
  4. Record-Keeping and Capital Gains:

    • Detailed records, including purchase information (date, equity name, quantity, and cost), must be maintained to calculate capital gains accurately.
    • In the event of the death of one spouse, the investments automatically transfer to the surviving spouse, and on the death of the surviving spouse, capital gains are calculated based on market value at the time of death minus the original cost.
  5. Merging Accounts vs. Keeping Separate:

    • The expert suggests that the decision to merge accounts into a single joint account or maintain separate jointly-owned accounts depends on the individual's record-keeping preferences.
  6. Expert Opinion and Source:

    • Theresa Morley, identified as a partner with Morley Chartered Accountants in Barrie, Ont., provides expert advice in response to the reader's query.
    • The article concludes with a disclaimer regarding affiliate links and a commitment to unbiased editorial content.

This information is valuable for individuals considering joint ownership of investment accounts, shedding light on tax implications, record-keeping requirements, and considerations in estate planning.

How are jointly held investment accounts taxed? - MoneySense (2024)
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