30 September 2003 Internal T.I. 2003-0022487 - Section 241

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:

Where a taxpayer resides in the Province of New Brunswick and is mentally incompetent, and the taxpayer's father appointed a guardian for the taxpayer under his will, whether the guardian would qualify as a "legal representative" of the taxpayer and, consequently, would fall within the ambit of "person" for the purposes of subsection 241(5) of the Income tax Act.

Position:

Where the guardian of the taxpayer has the power to manage but has no power to sell, convey or encumber of the taxpayer's property under the New Brunswick Guardian of Children Act, the issue as to whether the guardian has the power to administer, wind up, control or otherwise deal in a representative or fiduciary capacity with the taxpayer's property involves an interpretation of the New Brunswick law, which is outside the scope of our expertise.

Reasons:

See above.

September 30, 2003

Client Services Division Income Tax Rulings Directorate
Saint John Tax Services Office Daniel Wong
126 Prince William Street (613) 954-4949
Saint John NB E2L 4H9

Attention: Louise McShane
2003-002248

Section 241 of the Income Tax Act (the "Act")

This is in reply to your memorandum of June 5, 2003, wherein you requested our opinion as to whether you have the authority under section 241 of the Act to release taxpayer information relating to a taxpayer to the taxpayer's sister as described in the following scenario.

The request came from a taxpayer's sister who requested taxpayer information relating to her brother. The taxpayer resides in the Province of New Brunswick. He is mentally incompetent. He has been living with his father. The taxpayer's father has recently passed away. In his will, the taxpayer's father named his daughter to be the guardian of the taxpayer. You requested as to whether you could release the taxpayer's information to his guardian sister under section 241 of the Act.

Our Comments

Subsection 241(5) of the Act permits an official (as defined in subsection 241(10) of the Act) to provide taxpayer information relating to a taxpayer to the taxpayer, and with the consent of the taxpayer, to any other person.

Subsection 248(1) of the Act defines "taxpayer" to include any person whether or not liable to pay tax.

The word "person", or any word or expression descriptive of a person, is defined in subsection 248(1) to include, inter alia, the heirs, executors, liquidators of a succession, administrators or other legal representatives of such a person, according to the law of that part of Canada to which the context extends.

The term "legal representative" of a taxpayer is also defined in subsection 248(1) to mean a trustee in bankruptcy, an assignee, a liquidator, a curator, a receiver of any kind, a trustee, an heir, an administrator, an executor, a liquidator of a succession, a committee, or any other like person, administering, winding up, controlling or otherwise dealing in a representative or fiduciary capacity with the property that belongs or belonged to, or that is or was held for the benefit of, the taxpayer or the taxpayer's estate.

Accordingly, a person who has the power to administer, wind up, control or otherwise deal in a representative or fiduciary capacity with a taxpayer's property would qualify as a "legal representative" of the taxpayer and, consequently, would fall within the ambit of "person" for the purposes of subsection 241(5) of the Act.

The issue in this case is whether the taxpayer's guardian who is appointed under the will of the taxpayer's father would qualify as a "legal representative".

It appears that the appointment by a person of a guardian for the person's child in his will is recognized by the New Brunswick law, as subsection 4(2) of the New Brunswick Guardian of Children Act ("Guardian Act") states that:

"Subject to the right of the other parent to apply for custody, a parent who, immediately before his death, is by virtue of section 3 entitled to appoint a guardian or to revoke such an appointment, may in his Last Will and Testament appoint a person or persons to be guardian or guardians of his child".

Also, a child who is covered under the Guardian Act has no age limit, as "child" is defined in section 1 of the Guardian Act to mean "a child domiciled or resident in the Province, whether born before or after this Act comes into force, and includes a child whose father and mother are not married to one another".

Section 5 of the Guardian Act confers certain powers to the guardian, which states:

"Except as limited by the terms of his appointment, a guardian established or appointed under this Act

(a) has, subject to an order of custody issued by a court of competent jurisdiction, the right to the custody of the child and to control his education and upbringing, and

(b) shall exercise care and management of all property belonging to or intended for the use and benefit of the child that is not otherwise held in trust for his benefit, but a guardian established or appointed under this Act has no power to sell, convey or encumber such property except as authorized by The Court of Queen's Bench of New Brunswick or any judge thereof."

However, such powers appear to be somewhat limited, as the guardian of a child under section 5 of the Guardian Act has the power to manage the child's property but has not power to sell, convey or encumber such property.

We also note that in the Province of New Brunswick, a court is given the custody of a mentally incompetent person and the management of the mentally incompetent person's property under the New Brunswick Infirm Persons Act ("Infirm Persons Act").

? Subsection 3(1) of the Infirm Persons Act states that "Subject to the provisions of the Mental Health Act, the court shall have full jurisdiction and authority over and in relation to the persons and estates of mentally incompetent persons, including the care and the commitment of the custody of mentally incompetent persons and of their persons and estates".

? Section 11 of the Infirm Persons Act states that "The powers conferred by this Act as to the management and administration of a mentally incompetent person's estate shall be exercisable in the discretion of the court for the maintenance or benefit of the mentally incompetent person, or of him and his family and dependents, or in the due course of management of the property of the mentally incompetent person".

? Section 15 of the Infirm Persons Act states that "The court may, by order, authorize and direct the committee of the estate of a mentally incompetent person to do in relation to the estate anything that such person might do if he had remained competent".

In our view, a person who has been granted the full powers to manage (including the power to sell, convey or encumber) a child's property either under the Guardian Act or the Infirm Persons Act would qualify as a "legal representative" of the child and, consequently, would fall within the ambit of "person" for the purposes of subsection 241(5). However, where the person has the power to manage but has no power to sell, convey or encumber of the child's property, as in the case of the guardian under the Guardian Act, the issue then becomes whether that person has the power to administer, wind up, control or otherwise deal in a representative or fiduciary capacity with a taxpayer's property. As this issue involves an interpretation of the New Brunswick law, which is outside the scope of our expertise, you may wish to consult with the Department of Justice to seek their opinion with respect to the scope of the guardian's powers under the Guardian Act.

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

We trust that our comments will be of assistance.

David Palamar
Corporate Reorganizations Section II Manager
for Division Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch