# Can I change an iTrade cash account to joint, then split the earnings?



## jmarks (Feb 14, 2012)

After working hard and paying off debt I was finally in a position to put cash into a trading account that is in my name only. 
I wasn't planning on making 35% return this year and am in the highest tax bracket so I got to thinking if I can change the account to joint and from that point onwards split the income that would save me some $$. I do realize that CR states that you can only split based on what each person puts into the account, but if I go 50/50 can they say it's not legal? After all we are married and everything is 50/50 these days if a relationship goes south. So technically even though I might have put all the cash in from of my chequing account, 50% of it belonged to her.


TIA


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## AltaRed (Jun 8, 2009)

jmarks said:


> After working hard and paying off debt I was finally in a position to put cash into a trading account that is in my name only.
> I wasn't planning on making 35% return this year and am in the highest tax bracket so I got to thinking if I can change the account to joint and from that point onwards split the income that would save me some $$. I do realize that CR states that you can only split based on what each person puts into the account, but if I go 50/50 can they say it's not legal? After all we are married and everything is 50/50 these days if a relationship goes south. So technically even though I might have put all the cash in from of my chequing account, 50% of it belonged to her.
> 
> TIA



First of all, you cannot directly change an individual account to a joint (JTWROS) account....because of the signatures required. But you can first open the joint account and then provide them with a Letter of Direction asking them to transfer all assets to the joint account, or in some cases depending on the brokerage, you could journal them all over yourself online.

With respect to CRA, you are expected to keep a record of the paper trail of whose money goes into joint accounts. If CRA comes asking (not likely, but possible), you will have to prove it or be dinged for tax evasion. So, in this instance, you would have to, or should, attribute all the existing assets and the income from them to yourself (if no records proving otherwise). 

Going forward, your wife should make her own deposits from her chequing account and/or have a paper trail of her income that is first being deposited to a joint chequing account is equal to, or more than, the amount she then moves to the Joint investment account after getting paid. Remember it is perfectly legal for you to pay for 100% of household expenses allowing her to disproportionately funnel her earnings into the investment account to generate investment income in her name.

Depending on account sizes, it is often easiest for record keeping to have two joint accounts, one with your name first and that is 100% attributable to you, and the other with her name first 100% attributable to her.


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## Sasquatch (Jan 28, 2012)

I'm also with Scotia I trade and I'm not sure if you can even open a joint cash account. Why don't you phone them? 
As far as the 50/50 split in a joint account, my wife and I have been doing that on our joint savings accounts for 40 years now and nobody has ever questioned it.
I've never heard of anybody who was questioned about this unless it involved really SUBSTANTIAL amounts of income!


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## AltaRed (Jun 8, 2009)

Sasquatch said:


> I'm also with Scotia I trade and I'm not sure if you can even open a joint cash account. Why don't you phone them?
> As far as the 50/50 split in a joint account, my wife and I have been doing that on our joint savings accounts for 40 years now and nobody has ever questioned it.
> I've never heard of anybody who was questioned about this unless it involved really SUBSTANTIAL amounts of income!


Scotia iTrade does allow joint cash accounts as my former spouse and I had them. As for the 50/50 split, just remember if CRA comes calling, you will have to prove it. And yes, there are instances of CRA requesting such documentation. I would never advocate or suggest anyone knowingly practice tax evasion.


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## Sasquatch (Jan 28, 2012)

AltaRed said:


> Scotia iTrade does allow joint cash accounts as my former spouse and I had them. As for the 50/50 split, just remember if CRA comes calling, you will have to prove it. And yes, there are instances of CRA requesting such documentation. I would never advocate or suggest anyone knowingly practice tax evasion.


Agreed!
I would guess that the CRA had/has a pretty good idea of our incomes through the years, which were/are pretty well equal. I'm sure they would've raised the issue if they thought that we are ripping them off!


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## Guban (Jul 5, 2011)

Sasquatch said:


> Agreed!
> I would guess that the CRA had/has a pretty good idea of our incomes through the years, which were/are pretty well equal. I'm sure they would've raised the issue if they thought that we are ripping them off!


Your income being pretty well equal is likely the key. There is no point in you and your wife trying to reallocate investment income in this situation. 
It sounds like this is exactly the reason the OP wants to rename the account. This is tax evasion, and is clearly illegal. Whether they would be caught, that is a different question.


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## AltaRed (Jun 8, 2009)

Guban said:


> It sounds like this is exactly the reason the OP wants to rename the account. This is tax evasion, and is clearly illegal. Whether they would be caught, that is a different question.


Agreed, but based on the tone of the OPs post (what seems to be a targeted manipulation/dare), this is practically an invitation for CRA to pursue him should he go down this path. Not the sort of thing I would advise anyone writing in a public forum in which some members/guests reading this could be CRA employees.


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## jmarks (Feb 14, 2012)

Thanks for all your comments!
Just for the record I'm looking for ways to optimize our tax situation, not evade taxes! 
It sounds to me the important thing is to ensure there is a paper trail. So if I where to pay all the bills and have her put her pay cheque into a new joint account then we should be able to minimize taxes and have the proper paper trail. Right?


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## AltaRed (Jun 8, 2009)

jmarks said:


> It sounds to me the important thing is to ensure there is a paper trail. So if I where to pay all the bills and have her put her pay cheque into a new joint account then we should be able to minimize taxes and have the proper paper trail. Right?


Yes and yes. I mentioned above about having 2 JTWROS acccounts, if the amount of funds warrant it. It is much easier to track attribution when his and hers is separated entirely than to try to keep track of which portions of which investments in a single joint account are attributable to whom. For example, IF you rolled your current assets into a single new JTWROS account, you would have to keep records of those assets of which the income would be attributable to you, while new assets purchased by your wife would have income attributable to her. That is a huge record keeping nightmare.

Much easier to utlimately have 2 joint accounts, one attributable to you and one to her.


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## Zeeshanbmerchant (Jan 4, 2014)

jmarks said:


> Thanks for all your comments!
> Just for the record I'm looking for ways to optimize our tax situation, not evade taxes!
> It sounds to me the important thing is to ensure there is a paper trail. So if I where to pay all the bills and have her put her pay cheque into a new joint account then we should be able to minimize taxes and have the proper paper trail. Right?


Yep that is totally legal. This exact strategy is actually mentioned in KPMG's tax planning guide for 2014, though not for the particular investment you are talking about.

The high income earner can pay more bills, leaving the low income earner to make more investments, and in turn reduce the tax on returns.


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## joncnca (Jul 12, 2009)

1. when the higher income earner pays more bills, and the lower income earner makes more investments, are you implying that there is a joint account in this situation, or is the investment solely held in the name of the lower earner to take advantage of his/her lower tax bracket?

2. how detailed do the records need to be in situation 1. above...if there's a paper trail of higher earner paying bills, and lower earner making investments, do you need to keep more records beyond the actual bills?

3. what is the point of having 2 joint accounts...doesn't this defeat the purpose of having a joint account? yes, it makes it more clear for attribution purposes, but then why not just have 2 single accounts...i would think that the purpose of a joint account is to reduce paperwork/administration..


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## Sasquatch (Jan 28, 2012)

The way I always looked at it was that the individual income of both spouses has no bearing on the split percentage. The only thing that matters is how much each has deposited into the joint account, which then is transposed into a percentage.

If the difference in income is substantial and a 50/50 split is claimed, one better be prepared to substantiate it even though generally speaking a deposit into an account ( in person or via ATM) generally does not show the depositor. The only sure way would be a transfer from an individual account of each spouse.

So, in theory it's possible for a couple with a stay home mom to claim a 50/50 split in their joint account interest, if they can prove to the CRA, who deposited what and when!

Of course, if both incomes are roughly the same, things are much easier to manage!


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