1. Whether the B and C First Nations are each considered to be a public body performing a function of government and thus qualify for exemption under paragraph 149(1)(c) of the Income Tax Act.
2. Whether each of the B Trust and the C Trust is a separate trust?
3. Whether subsection 75(2) will apply to deem undistributed income of the trust to be income of the B First Nation or the C First Nation?
4. Will each trust be able to deduct, under paragraph 104(6)(b), in computing its income for a year, amounts that become payable to the relevant First Nation?
1. Yes, based on a factual determination, the First Nations are each considered to be a public body performing a function of government in Canada, as per paragraph 149(1)(c).
2. Not a matter to be ruled on;
4. Yes, provided that the trustees exercise their discretion before the end of the year to make such amounts payable.
1. Primarily since each of the First Nations has negotiated with Canada a land settlement agreement which is the subject of this ruling and will be involved in the administration and implementation of the settlement. In addition, each of the First Nations provides an extensive list of community services and programs. Based on the facts provided, the First Nations are providing essential community services even though they haven't formalized the services in by-laws.
2. This is a question of fact and law, and it is not appropriate for us to make a binding ruling in this matter. Whether there are two trusts or only one does not affect the essence of the rulings.
3. The B First Nation and the C First Nation, will contribute the funds to the trusts. The two First Nations are entitled to the compensation in respect of certain reserve lands, and they will direct Canada to place their monies into the trusts which the First Nations will create. Thus there is constructive receipt by the First Nations. It is noted in the Settlement Agreement (XXXXXXXXXX) that if the Trust Agreement is not approved, Canada will place the compensation payment in two equal shares into the Revenue Accounts (i.e. in the CRF) - these Accounts are maintained for the benefit of specific Bands.
4. The trust provides that the payment of income to the beneficiaries is at the absolute discretion of the trustees, so a deduction can be made only if that discretion is exercised. It is noted that any amount of income that becomes payable will be paid shortly afterwards by the issuance of an unrestricted demand promissory note, and that the trust has the authority to borrow in order to meet its obligation to pay cash for such note. Note that such income will not include amounts subject to subsection 75(2).