TOSI Question

Tax Topics
1

I have a husband and wife that have a joint T5 with dividend income on it. The program is calculating TOSI on this income. From my research it appears this is applies only to income split with a minor. Am I missing a box or something to get this to go away? They are both seniors and have birthdates typed in. I thought initially it was because the slip was labled joint in the CRA download but the slip in tax cycle was 100% the husband. I fixed that and it simply split the TOSI tax to show half on each return… Or does it have something to do with the fact that the husband’s top marginal rate is over 33% but the wife’s isn’t? This is new this year as I recall there being a kiddie tax/attribution rule for split income between parents and minors but not between adults. It only does it on this return for some strange reason and I have other returns with joint slips like this although I 'd have to go check if the top marginal rate has an under/over 33% split as well.

Just checked the slip again and it is not actually joint but is labled “Subordinate Voting Shares” . Does this mean it is subject to TOSI and “shared” with the trust even though the tax payer is over 18?

The online blurb I found was " Under the current income tax rules, the TOSI applies the highest marginal tax rate (currently 33%) to “split income” of an individual under the age of 18. In general, an individual’s split income includes certain taxable dividends, taxable capital gains and income from partnerships or trusts." This does not apply to a senior couple.

2

Are they arms-length or non-arms length from the corp issuing the dividend?

3

My experience has been that you as the preparer advise the software whether TOSI applies, not the other way around. If you determine that one of the spouses is a Specified Individual and TOSI applies then you would manually enter the amount on certain boxes of the T5 slip (in your case, where there has been a T5 issued for dividends). Otherwise, if TOSI doesn’t apply you simply leave those boxes blank. If you have not entered an amount in either of those boxes on the T5 slip that contains the dividends in question, but TaxCycle is still calculating TOSI on the T1206 then I’m at a bit of a loss.

Regardless of whether TOSI might have normally applied to this couple… wouldn’t the provisions of ITA 120.4 1.1( c )(i) apply to cancel the TOSI simply because the couple are both over 64? Is TOSI even an issue for seniors?

TOSI T5
TOSI T51157×538 211 KB

4

Since sometime in 2018 TOSI has applied to adults in the addition to the “kiddie tax”. However you are correct that for spouses over 65 it does not apply. TaxCyle has no way to know all the circumstances that apply, so you would be telling TaxCyle if TOSI applies.