With tax rates as high as they are in Canada, it's no wonder
that people continue to search for ways to reduce their tax bill.
Prescribed rate loan planning is a simple and effective strategy
that allows high-income earners to split income with their family
members who earn little or no income, including spouses, children,
grandchildren, and even minor nephews and nieces. The strategy
involves a loan of money or assets by the high-income earning
individual directly to one or more family members facing lower tax
rates or, more commonly, to a trust established for the benefit of
such family members. Where in-kind property is transferred,
consideration must be given to the taxes that may arise on the
transfer. To avoid the application of the attribution rules (that
cause all of the income earned by the loaned property to be taxed
in the high-income earner's hands), the loan must bear interest
of at least the "prescribed rate," a rate set by the
government every three
