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.
Principal Issues: In technical interpretation #2005-014996, why is there no mention of paragraph 60 of IC 72-17R5?
Position: In technical interpretation #2005-014996, we stated that section 116 applies to the disposition of a capital interest in an estate by the beneficiary of that capital interest, situation which is different from the one provided for in paragraph 60 of IC 72-17R5.
Reasons: Paragraph 60 of IC 72-17R5 applies to a deemed disposition of property upon death by a person in favour of his estate.
XXXXXXXXXX 2006-018171
Sylvie Labarre, CA
May 23, 2006
Dear Madam:
Re: Section 116 of the Income Tax Act (the "Act")
This is in reply to your letter of April 10, 2006 in which you request clarification of technical interpretation #2005-014996 and paragraph 60 of Income Tax Information Circular 72-17R5.
Paragraph 60 of Income Tax Information Circular 72-17R5 states that section 116 does not apply to property that is transferred or distributed on or after death and as a consequence thereof. This paragraph means that CRA will not apply section 116 of the Act to a deemed disposition of property upon death by a person (the deceased) in favour of his estate.
In technical interpretation #2005-014996, the deemed disposition of the deceased in favour of his estate had already taken place. In technical interpretation #2005-014996, the beneficiary of the estate disposed of the capital interest held in the estate, capital interest that was a taxable Canadian property. This was the disposition to which we applied section 116 and in that technical interpretation, we did not mention anything about the property of the deceased.
As stated in technical interpretation #2005-014996, in the case where the non-resident beneficiary file form T2062 Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property and can show that no capital gain arises as a result of the disposition of the non-resident's capital interest in the trust (i.e. as shown by the calculation on form T2062), the trust will not be required to remit or post any amount as security since the amount shown on the certificate of compliance will equal the full amount of the distribution.
We trust the above comments will be of some assistance.
Yours truly,
Alain Godin, Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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