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: Does an election under 259(3) by a qualified trust continue to be valid after the qualifying trust has transferred the property to another trust such that paragraph (f) of the def'n of disposition and 248(25.2) apply?
Position: yes
Reasons: As a transferee trust is considered to be a continuation of the qualified trust, any elections by the former trustee, including an election under 259(3), would continue to be valid until such time as the election is either revoked or the conditions for the election are no longer met.
XXXXXXXXXX 2002-014702
Annemarie Humenuk
Attention: XXXXXXXXXX
February 10, 2003
Dear XXXXXXXXXX:
Re: Trust-to-trust Transfers
This is in reply to your letter of June 14, 2002, in which you ask if an election under subsection 259(3) would continue to be valid following a trust-to-trust transfer involving no change in beneficial ownership such that paragraph (f) of the definition of disposition in subsection 248(1) applied.
All statutory references in this memorandum are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended.
Paragraph (f) of the definition of disposition in subsection 248(1) provides an exception to the general rule that a transfer to or from a trust results in a disposition of property. Where the conditions in paragraph (f) of that definition are met, a transfer of property from one trust to another does not constitute a disposition. Consequential to this provision, subsection 248(25.1) deems the trust receiving the property (other than a trust governed by an RRSP or RRIF) to be the same trust and a continuation of the previous trust for the purposes of the Act other than subsection 104(5.8) and paragraph 122(2)(f) and without affecting the personal liabilities of the trustees of either trust.
As a result, any election made by the former trustees, including an election under subsection 259(3), would continue to be valid following the trust-to-trust transfer until such time as the election is revoked, or in the case of an election under subsection 259(3), the trust ceases to be a qualified trust as defined in subsection 259(5).
This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.
We trust our comments will be of assistance.
Theresa Murphy
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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