Principal Issues: Who has authority to hold contributions to an Eligible Funeral Arrangement in an account.
Position: Refer to the terms of the Arrangement or to provincial legislation.
Reasons: Paragraph 20 of IT-531.
February 4, 2003
Dear XXXXXXXXXX :
Re: Eligible Funeral Arrangements
This is in reply to your letter of July 15, 2002, in which you ask if the XXXXXXXXXX can hold funds from an eligible funeral arrangement as defined in section 148.1 of the Income Tax Act (the "Act") and, if so, which sections of the Act give authority to hold such funds. Should our conclusion be that the XXXXXXXXXX has authority to hold funds from an eligible funeral arrangement, you also asked in our telephone conversation of October 28, 2002, if it is required to issue any T5 slips.
Your request appears to relate to a proposed transaction and, accordingly, should be the subject of a request for an advance income tax ruling submitted in accordance with the guidelines set out in Information Circular 70-6R5 Advance Income Tax Rulings dated May 17, 2002. Consequently, while we are unable to comment on your specific situation, we can offer the following general comments.
Section 148.1 of the Act provides that the person who establishes and maintains the eligible funeral arrangement (the "EFA") must be a person licensed or authorized under the laws of a province to provide funeral or cemetery services (the "qualifying person"). It also provides that there must be one or more custodians. If there is only one custodian, the custodian and the person who establishes and maintains an EFA can be the same person.
The only requirement provided in the Act with respect to the management of the EFA is that it must be maintained by the qualifying person. As mentioned in paragraph 20 of Interpretation Bulletin IT-531, Eligible Funeral Arrangements, dated January 29, 1999, applicable provincial legislation determines how the contributions are to be held:
20. When a qualifying person (e.g., a funeral director or cemetery operator) receives contributions under an EFA, the contributions may be required by the applicable provincial legislation or by the terms of the arrangement itself
(a) to be held in a trust governed by the arrangement (the trust would be a separate person for income tax purposes and the trustee of the trust would be a custodian under the arrangement - see 4 above); or