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: (i) Issue relating to the meaning of "trust company" in subsection 95(1) and paragraph 95(2)(l); (ii) Whether an Alberta trust corporation not authorized to carry on a deposit-taking business would qualify as a "trust company" for purposes of paragraph 95(2)(l).
Position: (i) General comments provided on subsection 95(1), paragraph 95(2)(l), Canadian Payments Association Act; (ii) Yes, although we have not considered how GAAR might apply.
Reasons: (i) The definition in subsection 95(1) is inclusive and includes a "loan company" defined in the Canadian Payments Association Act or a "trust company", not necessarily a "trust company" as defined by the Canadian Payments Association Act; (ii) On the assumption that the business of the Alberta trust corporation is subject by law to the supervision of a Alberta regulating authority similar to the Superintendent of Financial Institutions.
XXXXXXXXXX 2000-003735
S. Chua
October 15, 2001
Dear XXXXXXXXXX:
Re: Paragraph 95(2)(l)
This is in reply to your letter requesting our interpretation of the term "trust company" as defined in subsection 95(1) of the Income Tax Act (the "Act") and our comments on whether an Alberta trust corporation that carries on a business of providing fiduciary services (e.g., acting as trustee, custodian or executor), and which is not authorized to carry on a deposit-taking business, would qualify as a "trust company" for purposes of paragraph 95(2)(l) of the Act.
Your letter seems to involve proposed transactions for one or more specific taxpayers. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling submitted in accordance with the criteria set out in the Information Circular. However, we are prepared to offer the following general comments which may be of assistance.
You have stated that the Loan and Trust Corporations Act (Alberta) defines a trust corporation to include a body corporate that offers services to the public, inter alia, as executor, administrator, trustee, bailee etc., and carries on the deposit-taking business except in the case of a body corporate whose registration is subject to a term, condition, or restriction prohibiting it from carrying on the deposit-taking business. As such, a body corporate can qualify as an Alberta trust company without the ability to carry on the business of accepting deposits transferable by order to a third party. You have asked for our view on whether an Alberta trust corporation whose letters patent prohibit it from carrying on a deposit-taking business, would be described by the definition of "trust company" in subsection 95(1) and would qualify as such for the purposes of paragraph 95(2)(l) of the Act.
"Trust company" is a term defined in subsection 95(1) of the Act for purposes of subdivision i, division B of Part I of the Act, to include a corporation resident in Canada that is a "loan company" as defined by subsection 2(1) of the Canadian Payments Association Act. The word "includes" as used in subsection 95(1) means that the definition of "trust company" is "inclusive" in nature, i.e., although reference is made to "loan company" as defined by specific federal legislation, "trust company" is not required by subsection 95(1) to be defined by the same federal legislation. Therefore, a "trust company" that does not satisfy the requirements of subsection 2(1) of the Canadian Payments Association Act but is a trust company under some other federal or provincial legislation can constitute a "trust company" for purposes of subsection 95(1). Therefore, the Alberta trust corporation you described would qualify as a "trust company" for purposes of subsection 95(1).
For purposes of paragraph 95(2)(l), there exists a requirement that the business activities of the trust company be subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province. Therefore, assuming that the Alberta trust corporation you described is so regulated, it would also qualify as a "trust company" for purposes of paragraph 95(2)(l).
We would finally like to note that the Act contains general anti-avoidance rules (GAAR) which may apply to deny a tax benefit unless it is reasonable to consider that a transaction has been undertaken or arranged primarily for bona fide purposes other than to obtain a tax benefit.
We trust these comments will be of assistance.
Yours truly,
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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