Which of the following situations would most likely be subject to the Tax on Split Income (TOSI) rules?

Question: Which of the following situations would most likely be subject to the Tax on Split Income (TOSI) rules?

Answer options:

• A spouse receives eligible dividends from a family business where they genuinely work full-time and receive a reasonable salary. ✅ A 19-year-old child receives eligible dividends from a family corporation without any direct involvement or capital contribution in the business.
• A parent (aged 60 and retired) receives eligible dividends from a corporation where their adult child (aged 35) is the active manager and sole shareholder.
• A senior (aged 70) receives dividends from a public company where they hold shares.

Correct answer: A 19-year-old child receives eligible dividends from a family corporation without any direct involvement or capital contribution in the business.

Explanation: TOSI aims to prevent income splitting with specified individuals (such as a child aged 18 or over but under 25, or any other adult if not active in business or receiving reasonable compensation) where the income is derived from a related business and the recipient does not genuinely contribute. A 19-year-old receiving dividends without involvement is a primary target.