Dividend interest income in child's name

Stevie1 · ‎May 11, 2022

Can someone help me. I need to ask a question about dividends income from a child under 18 but don't where to go to ask in this forum. I need to know how does mother reports it in her tax return and which line. She has not received the T5, only a statement.

Thanking you in advance

janisbossenberry · ‎May 12, 2022

I am presuming you mean it was a dividend paid to a child, not from a child? If it is a small amount from a Canadian corporation and the parent was the source of the funds so is reporting it , I would use the T5 Slip, put the name and "no slip" in the description, then complete Box 24 with the actual amount received and Box 25 with the Taxable amount (which would be Box 24 times 1.38). If you are talking about a dividend the child received from a private corporation in a larger amount, you have other issues to deal with.

Stevie1 · ‎May 17, 2022

Thank you very much Janis. I really appreciate your response. It helped.

jrbooks · ‎May 17, 2022

You may be running into "kiddy tax" on this, regardless of the amount. It all depends upon the source of the dividends. If they are from a private corporation (generally a CCPC), then there is definitely an issue as they are the child's income but are taxed at the highest tax rate federally. The original "kiddy tax" was introduced around 2000 to catch those families who were using dividends as a way to move income from higher-income parents and grandparents to younger family members who had little or no other income. More recently, TOSI was introduced to minimize this form of income splitting.

Even if the dividends are not from a CCPC, they may be subject to the attribution rules if money to purchase same came from a relative. The only way they would remain in the child's hands would be if the child is investing his/her own funds (eg arising from Canada Child Benefit) or funds which have the the gift of a NON-RESIDENT grandparent. Attribution rules generally mean the person who provided the funds has to declare the income. Oddly, if the child is to sell those shares (in a non-CCPC) to an unrelated party, any capital gain is NOT subject to the attribution rules.

This is a complex topic, and you need to be certain the parent of the child understands the nature of the investment and the source of the funds so the income can be reported correctly.

Hope this helps.

Jo H Ruelle