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:
Whether upon the vesting of all interests in a trust, the 21-year rule of 104(4) will not apply?
Position:
Correct.
Reasons:
As noted previously in E9427445, the definition of "trust" in subsection 108(1) excludes, for purposes of 104(4) inter alia, a trust all interests in which, at that time, have vested indefeasibly - other than those trusts described in (g)(i) to (vi).
XXXXXXXXXX J.D. Brooks
2000-003819
November 7, 2001
Dear XXXXXXXXXX:
This is in reply to your letter of July 11, 2000 concerning the application of the 21-year deemed disposition rule in subsection 104(4) of the Income Tax Act where the trust has one beneficiary that is neither the settlor nor the settlor's spouse. We apologize for the delay of our response.
As noted in your letter, certain trusts are excluded from the 21-year deemed disposition rule in subsection 104(4). Specifically excluded is a trust all interests in which have vested indefeasibly at the time the rule would apply, other than those trusts listed in subparagraphs (g)(i) to (vi) of the definition of trust in subsection 108(1). If the interest of the sole beneficiary is vested indefeasibly and the trust is not otherwise subject to the rule because of one of the previously mentioned subparagraphs, then the trust would not be subject to the 21-year deemed disposition rule in subsection 104(4). The vesting of the beneficiary's interest itself does not result in a disposition by the trust of its property or by the beneficiary of the trust interest. On the death of the beneficiary, his or her capital interest in the trust would be subject to subsection 70(5).
We trust that these comments are of assistance to you.
Yours truly,
T. Murphy, Manager
Trusts Section
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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