Tax Planning Strategies-Income Splitting

Splitting of income for tax planning purposes is permitted in certain circumstances.

REQUIRED:

1. Explain why income splitting results in an overall decrease in taxes payable for the family when one spouse makes significantly more income than the other.
2. Lisa is a single parent with one child over the age of 18 and two children under 10 years old. List and describe two (2) income splitting strategies that would be permitted for Lisa to use for tax purposes.
3. From a tax perspective, explain the difference between income earned from the sale of your shares and business income?
4. List and describe three (3) factors used by CRA to determine if income earned by the investor is considered capital gains or business income.