In the process of managing the processing of 2 million tax slips for my employer, the world’s largest transfer agent, the following question came across my desk:
A husband and wife divorced during the year and the husband did not make his child support payments as required by court order. As a result, family court here in Canada passed a judgement stating that any stock he held be removed from his name and either cashed in so those funds could be given to his wife, or the stock be transferred to his wife so that she may cash them in as she needs them.
So here is the question:
Who gets the T5008? Him or her?
Note: Traders or dealers in securities have to file a T5008 information return to report purchases of securities as principal for their own account, and sales of securities they make as an agent or nominee, for any vendor.
Issuers of securities and their agents or nominees use this (T5008) information return to report redemptions, acquisitions, or cancellations of securities.
Might this be considered a deemed disposition?
You do not have to report deemed dispositions on a T5008 slip, in certain circumstances, the Income Tax Act considers that a property has been disposed of, even though no real compensation in the form of money or other consideration has been received.
Some examples of when a deemed disposition may occur are:
- transfers of property to a trust;
- gifts of property (that is, the name of the beneficial owner of the property is changed);
- the owner dies; or
- the owner ceases to be a resident of Canada.
In this guide, “sale” generally refers to a transaction where the ownership of property is transferred from one person or entity to another for a sum of money or other consideration. In the case of a deemed disposition, ownership of the property is not transferred for money or other consideration. In addition, a deemed disposition is not a purchase, redemption or cancellation of a security. Consequently, a deemed disposition is not considered for the purposes of Income Tax Regulation 230 and a T5008 slip is not required.
Answer to follow…