| If funds were lent to a family trust or directly between family members under an income-splitting arrangement, the 2024 loan interest must be paid by January 30, 2025. Failure to do so would cause the income attribution rules to apply to tax the income earned on the funds in the hands of the lender, which would defeat the purpose of the arrangement altogether.
The above type of planning is used to split investment income between family members. The applicable CRA prescribed interest rate for new loans dropped to 4% on January 1, 2025, its lowest point in two years. Note that, if there was a pre-existing loan that was established at a time when the prescribed interest rate was lower, the lower interest rate would continue to apply. With the CRA prescribed interest rate declining, this type of planning will become more prevalent in reducing a family’s tax burden provided it meshes with their investment strategy. There are also other potential income-splitting strategies that can be designed to avoid TOSI. For additional information, contact your TZR advisor. The above content is for informational purposes only and is general in nature. It is not intended to be advice. No person or entity should act upon the information above without receiving professional advice after all the facts and circumstances specific to their situation are thoroughly reviewed. |
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