1 June 2000 Ministerial Letter 2000-0023308 - Non-resident Testamentary Trust

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Will the use of a non-resident as the trustee of a testamentary trust cause the trust to be a non-resident trust, and if so, what are the consequences of such an appointment, assuming the beneficiaries will continue to be resident in Canada?

Position: It-447 sets our criteria for determining the residence of a trust. A follow up letter will be prepared by Income Tax Rulings Directorate

Reasons: Because of the significant number of factors which may affect the individual's choice of trustee and/or residence of trust, a follow up letter will be prepared to discuss those issues.

June 1, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letters of April 13 and 25, 2000, further to my letter of March 30, 2000, concerning the taxation of foreign trusts and bare trusts.

In your April 13 letter, you asked if there are any negative tax consequences associated with the appointment of a non-resident as the trustee of a testamentary trust to be established in the event of your death for the purpose of maintaining your farm for the benefit of your children until they reach the age of 25. As explained in the enclosed Interpretation Bulletin IT-447, Residence of a Trust or Estate, the residence of a trust is based on the residence of the trustee or trustees who exercise management and control of the trust. As the residence of a trust is relevant for many purposes of the Income Tax Act, a non-resident testamentary trust may be subject to unexpected tax consequences if it is intended that the trust be considered to be resident in Canada. Whether or not those consequences are negative depends on the circumstances.

I have asked Mrs. Theresa Murphy of the Income Tax Rulings Directorate to provide you with further information concerning the taxation of a non-resident testamentary trust and how it differs from the taxation of a testamentary trust resident in Canada. If you have any questions in the meantime, I invite you to contact her by telephoning 0-613-957-8283 collect, or by writing to 320 Queen Street, 18th Floor, Place de Ville, Tower A, Ottawa, Ontario K1A OL5. Ms. Murphy is aware of this correspondence and will be pleased to be of assistance.

In your April 25 letter, you stated that my response to your previous letter did not adequately address your concerns. As previously indicated to you, the confidentiality provisions of the Income Tax Act prevent me from discussing the tax affairs of a specific taxpayer without the appropriate authorization. I regret that you found the general comments provided in my letter unsatisfactory. While I can confirm that a bare trust does not include a trust that has beneficiaries other than the settlor, I cannot comment on the tax affairs of another taxpayer.

I appreciate the opportunity to be of assistance.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

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