Client wants to give 5% shares in new company to son, who will not work for company.

Client wants to give 5% shares in new company...

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Client is incorporating sole-trader business and wants to give 5% of shares to his son. I assume this will be caught by income-splitting rules/settlements legislation and any income would therefore be taxed on him (the father). Is this correct? 

He already plans to gift some to his wife who works in the business with him, which I assume is fine.

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