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: When does a trustee act as bare trustee?
Position: General comments provided.
Reasons: Wording in the Act.
XXXXXXXXXX 2008-028077
July 28, 2008
Dear Sir:
Re: Technical Interpretation Request: Application of
Subsection 104(1) of the Income Tax Act (the "Act") to a Declaration of Trust
In your letter of June 5, 2008, you asked us to comment on the application of the above provision of the Act in regards to the terms of the severed copy of the Declaration of Trust included therein. Your letter advises that your firm represents the beneficiary. The Declaration of Trust was signed May 7, 2004.
As stated in paragraph 22 of Information Circular 70-6R5, the Canada Revenue Agency's tax services offices consider requests for written interpretations on completed transactions. We offer the following general comments which may be of assistance to you.
A trust for the purposes of the Act is defined in subsection 104(1) of the Act. That subsection provides that, if the arrangement is one in which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property and the trust is not a trust described in paragraphs (a) to (e.1) of the definition of trust in subsection 108(1) of the Act, the arrangement is deemed not to be a trust for the purposes of the Act.
A trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee's only function is to hold legal title to the property. In order for the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trust to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property.
For further assistance, we ask that you direct your enquiry to the local tax service office.
Yours truly,
T. Murphy
Manager
Trusts Section
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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