Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Can a trust elect, at a time that it is not a qualified trust, to have the provisions of subsection 259(1) apply to it?
Position TAKEN: No
Reasons: The trust must be a qualified trust at the time of the election.
XXXXXXXXXX 2002-016755
Cornelis Rystenbil, CGA
February 13, 2003
Dear XXXXXXXXXX:
Re: Section 259 of the Income Tax Act (the "Act")
This letter is in response to your letter dated October 9, 2002 in which you ask whether a trust can elect, at a time that it is not a qualified trust, to have the provisions of subsection 259(1) of the Act apply to it.
In your view, the election can be made since subsection 259(3) of the Act does not require that the trust be a qualified trust at the time of making the election since it does not refer to an "election by a qualified trust".
Subsection 259(1) allows a qualified trust to elect to have the provisions of that subsection apply. Subsection 259(3) of the Act states that, "the election by a trust ... under subsection (1) shall be made ...". In our view, the trust referred to in subsection 259(3) refers to a qualified trust that can make an election under subsection 259(1). In our view, a trust that is not a qualified trust cannot make an election under subsection 259(1) of the Act.
Our view is supported by the Department of Finance's Technical Notes dated Nov. 1985, which state "Section 259 is amended with respect to periods occurring after 1985 to permit an election to be made by a qualified trust so that its beneficiaries will be considered to hold a proportionate interest in the underlying assets of the trust for the purposes of the qualified investment and foreign provision of the Act. Where this election is made by a qualified trust it permits a beneficiary to benefit from ..." (Emphasis added).
We trust that our comments will be of assistance. However, as stated in paragraph 22 of Information Circular 70-6R5, the opinion expressed in this letter is not a ruling and consequently is not binding on the CCRA.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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