Earlier this year, I explained how certain attribution rules—tax rules designed to prevent income splitting between spouses or common-law partners—apply to RRSPs.

This article will look at attribution rules for TFSAs.

Can a person contribute to their spouse’s (or common-law partner’s) TFSA?

No. Section 146.2(2)(c) of the federal Income Tax Act (ITA) states that a TFSA “prohibits anyone other than the holder from making contributions under the arrangement.” In other words, only a TFSA holder can contribute to his or her own TFSA. The ITA, however, does not prevent an individual from gifting assets to his or her spouse; the spouse can then contribute that gift to his or her own TFSA.

Read: Navigate RRSP attribution rules

But, in the case of a gift, aren’t there attribution rules that would tax future income and capital gains to the gifting spouse?  

Outside of TFSAs, that is usually the case. Generally, whenever an individual gifts or transfers assets to a spouse or common-law partner, unless the transferring spouse receives fair market value consideration in exchange, future income and capital gains earned from the gift would normally be taxed to the transferor and not the recipient spouse (assuming the transferor remains a Canadian resident). These attribution rules, which are in place to prevent the simplest forms of income splitting, cease on death or relationship breakdown and are defined by sections 74.1(1) and 74.2(1) of the ITA.

Read: T1135 reporting and joint tenancy: what to do

When an individual gifts money to a spouse to be used for a TFSA contribution, do 74.1(1) and 74.2(1) apply?

Under certain conditions, no. Effective 2009, the year the TFSA was introduced, an exception to these attribution rules was also introduced. Specifically, under section 74.5(12)(c), attribution will not apply to a gift to a spouse while the gift is held in a TFSA in the spouse’s name. Also, for attribution not to apply, the gift must not have created or added to a TFSA overcontribution.

In other words, where a gift received by a spouse is contributed to a TFSA in his or her own name, while the gift is held in the TFSA, any income or capital gains earned from the gift will not be subject to attribution, provided the contribution did not create (or add to) an excess contribution.

Read: Tax traps for divorcing clients


Earlier this year, Camille contributed the maximum amount allowed to her TFSA. Her husband, Jeff, still has $10,000 of contribution room available. To take advantage of Jeff’s room, Camille gifts $10,000 to Jeff, which he promptly contributes to his TFSA. Later in the year, Jeff withdraws the $10,000 from his TFSA. Is the $10,000 withdrawal taxable? If yes, to whom?

The $10,000 withdrawal is not taxable; amounts withdrawn from a TFSA are tax-free. Also, any income or gains earned in the TFSA are exempt from the attribution rules discussed above and are also tax-free on withdrawal.

But what if Jeff were to reinvest the withdrawn $10,000 in a non-registered account and subsequently earn income or capital gains from the reinvested amount? Would a tax issue arise in this case?

Yes. According to CRA technical interpretation #2010-0354491E5, the attribution rules apply when money given to a spouse to contribute to a TFSA is subsequently withdrawn. So, since Jeff withdrew from his TFSA the $10,000 Camille gave him, the withdrawal would be subject to the 74.1(1) and 74.2(1) attribution rules. That means, if reinvested, future income and capital gains earned from the gift would be taxable to Camille.

There are questions that remain unanswered in the technical interpretation:

  • If Jeff’s TFSA was funded with money that came from both himself and Camille, would his withdrawal be considered sourced from his contributions or from the gift from Camille?
  • If Jeff’s TFSA increased in value from the time of contribution to the time of withdrawal, what portion of the withdrawal would be considered growth versus the original gift from Camille?

Answers to these questions would help determine what portion of the withdrawal would be subject to attribution, but guidance in this area is not yet clear.

What clients can do

TFSA holders who have received gifted money from a spouse intended for their TFSA, but who wish to stay clear of the attribution rules, should consider:

  • using TFSA withdrawals for personal, non-income producing purposes (e.g., personal use mortgage payments, car purchase, etc.),
  • using gifts from a spouse for non-income producing purposes and funding TFSAs personally; and/or
  • setting up a second TFSA for gifts from a spouse to allow for better tracking of source of funds.

The TFSA is flexible, easy to use and efficient as an investment vehicle. Like most things in life, though, there are some details to consider to achieve maximum value.

Wilmot George, CFP, TEP, CLU, CHS, is vice-president, Tax, Retirement and Estate Planning, at CI Investments. Wilmot can be contacted at wgeorge@ci.com.
Originally published on Advisor.ca
See all comments Recent Comments


Lets say I have taken the earned income out of my TFSA in December. Can my spouse gift me money in January to make the new annual contribution AND to repay the income that I took out in the previous calendar year?

Friday, Oct 20, 2017 at 1:41 pm Reply


Hi Anne, please see this response from Wilmot George, the author:

“With the TFSA, amounts withdrawn in a given year are added to TFSA contribution room beginning the following year. This is the case regardless of whether the amount withdrawn represents original contributions or growth accumulated within the TFSA. For example, if $4K is withdrawn from a TFSA in 2017, this amount would be added to the TFSA holder’s contribution room in 2018 in addition to the TFSA dollar limit available for 2018 (which, subject to indexation, would be $5,500). So, in this particular example, ignoring any carryforward room from prior years, 2018 TFSA contribution room would be $9,500.

Because TFSA rules allow for an individual to gift money to his/her spouse, which the spouse can then contribute to his/her own TFSA, in the above example, assuming you are not already in an excess contribution position, you would be permitted to contribute a $9,500 gift to your TFSA in 2018 without having to worry about excess contribution penalties.”

Thursday, Oct 26, 2017 at 3:30 pm

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