Does Canada have a gift tax?
No. Canada abolished its gift tax in 1972 and has no inheritance tax. You can give away cash with no tax consequence. However, gifting appreciated property (stocks, real estate, a cottage) triggers a deemed disposition, so the giver realizes and pays tax on the accrued capital gain.
Why do I pay tax when I give property away?
Because the Income Tax Act deems any non-arm's-length transfer of capital property to occur at fair market value. Even though you receive no money, you are treated as having sold the asset at its current value, so the built-in capital gain becomes taxable on your return in the year of the gift.
Are gifts to my spouse taxed?
Gifts to a spouse or common-law partner automatically roll over at your adjusted cost base, so no immediate capital gains tax applies. Be aware of the attribution rules, which can tax income and gains earned on the gifted property back to you rather than your spouse.
Can gifting reduce probate fees?
Yes. Assets given away during your lifetime are no longer in your estate at death, so they avoid provincial probate fees and the deemed disposition at death. The trade-off is that gifting appreciated property may accelerate capital gains tax and gives up your control of the asset.