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.
If, as one of its investments, a pooled fund trust" ("PFT") invests in another trust that only invests in assets listed in 5000(7)(a)(i), for purposes of determining whether the first trust satisfies paragraph (d) of the PFT definition, can we look through the second trust to income from its assets?
Reasons: The wording of the legislation does not accommodate this approach.
June 17, 2003
Re: Pooled Fund Trust
This is in response to your letter of March 13, 2003 inquiring about paragraph (d) of the definition of pooled fund trust ("PFT") in subsection 5000(7) of the Income Tax Regulations (the "Regulations").
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.
You have described a scenario in which 80% of the cost amount of a PFT's investments is in assets listed in subparagraph (a)(i) of the PFT definition in subsection 5000(7) of the Regulations ("Listed Assets"). The remaining 20% of the PFT's cost amount is an investment in a second trust, units of which are not marketable securities or any other type of Listed Asset. This second trust invests only in Listed Assets. You have asked whether the income from the second trust can be used on a "look through" basis to determine if the first trust satisfies the income test imposed by paragraph (d) of the PFT definition.
It is our position that the wording of the PFT definition does not accommodate an interpretation as broad as that which you propose. Paragraph 5000(7)(d) of the Regulations requires that at least 95% of the PFT's income be derived from, or from the disposition of, investments described in paragraph (a) of the PFT definition in subsection 5000(7) of the Regulations. Income from a trust is not income described in paragraph (a) of the PFT definition in subsection 5000(7) of the Regulations. Accordingly, in determining whether the test in paragraph (d) of the PFT definition in subsection 5000(7) of the Regulations has been met, income from a trust cannot be included in the calculations.
As noted during our telephone conversation on June 12, 2003 (XXXXXXXXXX/Sarazin/Shields), any expansion of the PFT definition is a question of tax policy, which should be addressed to officials of the Department of Finance.
We trust that these comments will be of assistance.
Mickey Sarazin, C.A.
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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