Place Vanier
Tower C, 10th Floor
25 McArthur Avenue
Ottawa, ON K1A 0L5
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Subject:
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GST INTERPRETATION
Sale of property by XXXXX in Trust
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Dear XXXXX
This is in response to a memorandum dated November 27, 1996, from Mrs. XXXXX of your office wherein XXXXX requested our comments on her draft interpretation on the above noted subject. Please accept our apologies for the delay in responding to her request.We are in general agreement with XXXXX draft response. The fact that subsection 9(1) of Part I of Schedule V to the Excise Tax Act (ETA) defines "settlor" in relation to a testamentary trust does not preclude the term settlor found in subsection 9(2) of Part I, Schedule V to the ETA from having meaning with respect to other forms of personal trusts. However, we offer the following specific comments on the draft letter:
1. Paragraph (c) of the exclusions from the section 9 exemption should specify that the parcel was subdivided into more than two parts by the individual vendor, the personal trust or the settlor of the trust. It should also be mentioned that a subdivision or severance of a part parcel that is sold to a person who has the right to expropriate that parcel is deemed not to be a subdivision or severance for the purposes of this exclusion.
2. The third from last paragraph of the letter deals with the transfer of the title to the subject property from XXXXX[.] We suggest you add "in trust" after XXXXX in the first sentence of this paragraph as that is how the transfer was characterized by the incoming letter and the related documentation. Also, the transfer of the property into a trust in XXXXX would have been governed by section 268 of the ETA. The consideration for XXXXX deemed sale of the property was deemed to be equal to the proceeds of disposition as determined under the Income Tax Act, rather than the fair market value of the property at that time.
3. Bill C-70 received Royal Assent on March 20, 1997. The references to "proposed amendments" in the letter should be changed accordingly.
Analysis
Settlor is defined in Black's Law (sixth edition) as: "The grantor or donor in a deed of settlement. Also, one who creates trust. One who furnishes the consideration for the creation of a trust, though in form the trust is created by another." The Concise Oxford Dictionary defines settlor as: "one who makes a settlement especially of property".
According to both definitions, XXXXX would be the "settlor" of any trust with respect to the property that is the subject of the draft interpretation.
Some doubt exists as to the person that is making the sale in this case. Is it a personal trust with XXXXX and XXXXX as beneficiaries? Is it a personal trust with XXXXX as sole beneficiary? Is it a bare trust for XXXXX[.] In each of these eventualities the sale of the property to XXXXX in August of XXXXX will be taxable because of paragraph 9(2)(c) of Part I of Schedule V to the ETA.
Regarding the XXXXX transfer of the property into trust: section 54 of the Income Tax Act states that the transfer of legal title to a property which does not result in any change in beneficial ownership of the property is not a disposition. Thus, if legal title was transferred to XXXXX to hold in trust for XXXXX as the continued sole beneficial owner, there would have been no proceeds of disposition in XXXXX[.]
If you have any questions or need clarification on this matter, please do not hesitate to call me at (613) 954-8852.
Yours truly,
Heather MacLeod
A/Rulings Officer
Financial Institutions and Real Property
GST Rulings and Interpretations
XXXXX
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