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: 1. Can an election be made under section 259 of the Act by a master trust that does not satisfy the requirements of subsection 5000(1.2) of the Regulations?
2. Must a new section 259 election be filed every time that the number of units of a master trust held by a taxpayer changes? 3. Must information described in 259(4)(a) be provided after a section 259 election has been filed every time a new taxpayer acquires units of a master trust?
Position: 1. Yes. 2. No. 3. No.
Reasons: 1. The application of section 259 is not dependent on the applicability or non-applicability of regulation 5000(1.2). 2. The election is for a period of time and all units acquired, held and disposed of during that period are covered by the election. 3. Because the information must be made available not more than 30 days after the election is filed, it can only apply to persons who held units in the trust during the period retro-actively covered by the election up to the date the information is provided.
2001-007198
XXXXXXXXXX G. Kauppinen
(613) 957-8971
April 26, 2001
Dear XXXXXXXXXX:
Re: Foreign Property held by Registered Pension Plans ("RPP") and Master Trusts
This is in reply to your letter dated February 27, 2001 regarding the above-noted subject.
We confirm the foreign property rules in the context of your request as follows.
The foreign property limits and tax (if applicable) will be applied to both the beneficiary (i.e. the RPP) and the master trust independently and will be calculated in respect of foreign property held by each taxpayer if the master trust has not filed an election under subsection 259(3) of the Income Tax Act (the "Act").
The total cost of an interest in a master trust will be considered to be foreign property to an RPP at a point in time unless an election under section 259 of the Act has been or is made by the master trust or the exception in subsection 5000(1.2) of the Income Tax Regulations (the "Regulations") applies at that time (i.e., the RPP holds no other property which is foreign property or the master trust holds no foreign property at that time).
If an election is filed by the master trust pursuant to section 259 of the Act, the master trust itself will not be subject to tax on excess foreign property held by it (subsection 206(2) of the Act) pursuant to subsection 206(2.1) of the Act. In this situation, each beneficiary of the trust (i.e. the RPP) will be considered, for the purposes of subsection 206(2), to own its proportionate share of the foreign property of the master trust.
In respect of the other questions you have asked, we confirm the following:
1. An election under section 259 of the Act can be made by a master trust that does not meet the requirements of subsection 5000(1.2) of the Regulations.
2. Once an election under section 259 of the Act has been made, it is not necessary for another election to be filed each time a unit of the trust is acquired by a taxpayer. An election will cover all acquisitions, holdings and dispositions made up to 15 months before the date the election is filed (as determined in the election) until the time that the election is revoked (which, as determined in the notice of revocation, could be up to 15 months prior to the date the notice of revocation is filed, and which, consequently, could be before or after the date that the election is filed).
3. The unitholders referred to in paragraph 259(4)(a) of the Act are those taxpayers who held units of the qualifying trust during the retroactive period covered by the election (up to 15 months prior to the day the election is filed) to the time that the election is revoked. However, because the notification must be filed not more than 30 days after making the election, this requirement is restricted to persons who held units during the period retroactively covered by the election up to a maximum of 30 days after the date the election is filed. There is no requirement to provide information every time a unit is acquired by a taxpayer after the day the information required under paragraph 259(4)(a) is provided. However, one would expect that a prospective purchaser of a unit of a qualified trust would be informed that the unit was in respect of a trust which had filed an election pursuant to section 259 of the Act.
As you have pointed out, paragraph 259(4)(a) of the Act deals with notification that an election has been filed and is independent of the requirement to provide information with respect to the tax consequences of the election upon request by a unitholder pursuant to paragraph 259(4)(b) of the Act. A request under paragraph 259(4)(b) of the Act may be made at any time during the period of time covered by the election.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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