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: Interpretation of Reg. 5000(1.2) in circumstances where assets of the defined benefit provisions of a RPP are held in a master trust and the assets of the defined contribution provisions of the same plan are held by an insurance company.
Position: Pursuant to paragraph 5000(1.2)(a), provided that the participating trusts do not hold any other foreign property, which is a question of fact, the master trust will not be considered to be foreign property.
Reasons: By virtue of the requirements of a master trust in Regulation 5001, the beneficiaries of the master trust are the participating trusts
XXXXXXXXXX 2001-008035
July 25, 2001
Dear XXXXXXXXXX:
Re. Master Trusts and Regulation 5000(1.2)
This is in reply to your letter of April 18, 2001 wherein you requested our views as to the technical interpretation of subsection 5000(1.2) of the Income Tax Act Regulations (the "Regulations") in the circumstances described in your letter. Specifically, you are concerned about the application of subsection 5000(1.2) in circumstances where assets in respect of the defined benefit provisions of a registered pension plan are held in a master trust and the assets of the defined contribution provisions of the same plan are held by an insurance company outside of the elected master trust and not as part of the beneficiary participating trusts.
The particular circumstances described in your letter appear to be a factual situation involving specific taxpayers. As explained in Information Circular 70-6R4 dated January 29, 2001, 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. Should your situation involve a specific taxpayer and completed transactions, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we can offer the following general comments which may be of assistance.
Pursuant to 149(1)(o.4)of the Income Tax Act (the "Act"), no tax is payable under Part I of the Act in respect of a trust which is a prescribed to be a master trust and elects to be treated as such. Section 5001 of the Regulations sets out the requirements of a master trust, including in paragraph (e) the requirement that each of the beneficiaries of the master trust must be a trust governed by a registered pension plan or deferred profit sharing plan. Pursuant to sections 205 and 206 of the Act, a master trust and the participating trusts will be required to pay tax on foreign property in excess of the foreign property limits. The definition of foreign property in subsection 206(1) provides at paragraph (i) that prima facie any interest in a trust is considered foreign property. Subsection 5000(1.2) prescribes that an interest in a master trust is not considered to be foreign property (a) when no other property of the beneficiary of the master trust is foreign property at that time or (b) when the master trust does not own any foreign property at that time.
By virtue of the requirements of a master trust in Section 5001 of the Regulations, the beneficiaries of the master trust are the participating trusts. Pursuant to paragraph 5000(1.2)(a), provided that the participating trusts do not hold any other foreign property, which is a question of fact, the master trust will not be considered to be foreign property for the purpose of section 206 of the Act.
We trust that our comments will be of assistance.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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