Currently, the TOSI rules do not apply to income or taxable capital gains of a minor earned on an inherited property where that property is inherited from a parent. This also applies to property inherited by a minor from any individual if the minor is enrolled as a full-time student at a post-secondary institution or if the minor is eligible for the disability tax credit. Under the proposed new rules, this exclusion for inherited property is extended to apply to individuals who are under 25 years of age. Note, however, that this exclusion does not apply to individuals aged 25 and older, even if the individual inherited the property before the year they turned 25 years of age.
A more general exclusion applies for adult individuals. Where an individual over the age of 17 has earned income or a gain from an inherited property that would be considered split income, an exclusion will generally be available to this individual if an exclusion would have applied to the deceased individual (from whom the property was inherited) had the deceased earned the income directly.
Lastly, there is a specific rule that will be beneficial for a surviving spouse. Effectively, an amount that would be split income of a surviving spouse or common-law partner will not be subject to TOSI if that amount would have been excluded from their deceased spouse or common-law partner's split income if it was earned by the deceased in their last taxation year. This is determined as if the TOSI rules applied in the year of death, and it applies regardless of the age of the deceased.