Corporate Attribution To Prevent Income Splitting

To prevent income splitting the Canadian Income Tax Act contains rules that reallocate income to a transferor in certain non arms length situations. These rules are called the attribution rules and normally apply with a spouse and minor children. One of the rules is called "corporate attribution" and is found in section 74.4 of the Tax Act. Corporate attribution comes into effect when an individual tries to income split with family members by transferring or lending property to a corporation in order to benefit those lower tax rate family members through reducing the transferor's income. The Corporate Attribution rules apply if the following two conditions are met:

• Property was transferred or loaned to a corporation, and