Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether a taxpayer who transferred or lent property to a specified foreign trust while he was a non-resident of Canada is required to file an information return under subsection 233.2(4) if he was a resident at the end of the trust's year.
Position:
Yes.
Reasons:
The legislation states that the taxpayer shall file the return as long as the taxpayer was a resident of Canada at the end of the trust's year and he transferred or lent property to the trust before the end of that trust's year. It does not matter whether the transferor or lender was or was not a resident of Canada at the time of the transfer or loan of property.
972858
XXXXXXXXXX S. Leung
Attention: XXXXXXXXXX
February 26, 1998
Dear Sirs:
Re: Subsection 233.2(4) of the Income Tax Act (the "Act")
We are writing in response to your letter of October 28, 1997 in which you requested our comments on your interpretation of paragraphs 233.2(4)(a) and (d) of the Act.
You enquired about whether an individual who transferred or lent property to a specified foreign trust (as defined under subsection 233.2(1) of the Act) while he was a non-resident of Canada is required to file an information return under subsection 233.2(4) of the Act. You stated in your letter that if the term "the trust's year" in paragraph 233.2(4)(d) of the Act were interpreted to be the year that the individual transferred or lent property to the trust, then subsection 233.2(4) of the Act would not apply to require the individual to file an information return because the individual was not resident in Canada at the end of the trust's year when property was transferred or lent to the trust.
Our Comments
It is our view that the trust's year is not necessarily the year of the transfer or loan of property. When the preamble of paragraph 233.2(4)(a) of the Act states that "at any time before the end of a trust's taxation year, property was transferred or lent...", it means that property could be transferred or lent at any time before the end of a particular taxation year of the trust. In other words, property could be transferred or lent in prior taxation years of the trust. Therefore, it does not make any difference whether the transferor or lender of property was a resident or non-resident of Canada at the time of the transfer or loan of property. As long as the transferor or lender is resident in Canada at the end of the trust taxation year, he is required to file an information return under subsection 233.2(4) of the Act for the year in which the trust's year ended.
The above position is clearly expressed in the instruction to file Form T1141 E "Information Return in respect of Transfers or Loans to a Non-resident Trust" where it states under the section "What transfers or loans do you have to report?":
"You must report transfers or loans made to the trust while you were a non-resident if you are a resident at the end of the trust's tax year..."
We trust you will find the above to be of assistance.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch
