# Attribution Rules Question



## FrugalTrader (Oct 13, 2008)

I understand that a higher income spouse cannot simply "give" money to a lower income spouse to invest without tax implications.

However, can the lower income spouse give money to a higher income spouse to invest without any tax implications?

I've been getting a lot of reader questions relating to the same thing. Basically, for the higher income spouse to contribute to a spousal RRSP, wait 2 calendar years to withdraw (so that tax will be attributed to the lower income spouse), then contribute that money to the higher income spouses RRSP.

Any thoughts?


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## stardancer (Apr 26, 2009)

Is it just me or is that about the third post in which the higher income spouse wants to shaft the lower income spouse with some maneuver regarding contributing then withdrawing then re-contributing to the higher income spouse's plan?

""I've been getting a lot of reader questions relating to the same thing. Basically, for the higher income spouse to contribute to a spousal RRSP, wait 2 calendar years to withdraw (so that tax will be attributed to the lower income spouse), then contribute that money to the higher income spouses RRSP.""

To do that would not be illegal, but certainly doesn't fulfill the income splitting purpose of a spousal RSP.


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## FrugalTrader (Oct 13, 2008)

Oops, must have missed previous messages. Might be the same person posting on the forum, sending emails to me, and commenting on MDJ!


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## OhGreatGuru (May 24, 2009)

I'm sure there is a logical flaw in this scheme somewhere. It may have something to with the permanent loss of RRSP room that results from the spousal withdrawal after 3 years. But my head is spinning just thinking about.


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## cardhu (May 26, 2009)

Any scheme involving withdrawing from RRSP prior to retirement, even in a low-income year, has to be weighed against the long-term risks ... the primary one being the permanent loss of contribution room ... but you also forfeit the possibility of drawing at an even lower rate during retirement.

Many people think that drawing from RRSP in the lowest tax bracket is as good as it gets ... those people are wrong.


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## bean438 (Jul 18, 2009)

Suppose you make 100K, and your spouse makes 20K.
Couldnt you argue that the 100K pays the day to day living expenses, and your spouse uses their earnings to invest and sock away 20K a year in their name?


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## MoneyGal (Apr 24, 2009)

Absolutely. This is a commonly-recommended strategy (and I'm not sure why you would arrange your affairs any differently in that situation). 

The higher-earning spouse can also lend funds to the lower-earning spouse to invest. If the loan is structured properly and interest is paid at the prescribed rate (currently 1% and loans struck at this rate are not subject to any increases in the prescribed rate), the interest is fully deductible.


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## bean438 (Jul 18, 2009)

So you could safely have the lower income spouse invest up to their income. I figured as much.
The loan strategy looks good.


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## MoneyGal (Apr 24, 2009)

I actually wrote an article for Canadian MoneySaver on income-splitting in the pre-retirement years...I don't have it posted online anywhere but have it available as a PDF. Investment loans are one of the principal strategies.


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