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: Whether a trust may be related to a beneficiary pursuant to paragraph 251(2)(a) of the Act.
Position: Yes, if the beneficiary is related to the trustee having ownership and control of the trust property.
Reasons: Combination of subsection 104(1) and 104(2) of the Act.
June 30, 2009
Non-Resident Policy Advisor
Small and Medium Enterprises
Compliance Programs Branch
Income Tax Rulings Directorate
Trust related to a beneficiary
This is in response to the electronic mail sent to Robin Maley on February 23, 2009 wherein you requested our comments on whether a trust could be related to a beneficiary for the purposes of paragraph 116(6.1)(b) of the Income Tax Act (the "Act") (i.e. the requirement to file a T2062C).
Pursuant to subsection 104(1) of the Act, a reference to a trust shall, unless the context otherwise requires, be read to include a reference to the trustee, executor, administrator, liquidator of a succession, heir or other legal representative having ownership or control of the trust property.
Pursuant to subsection 104(2) of the Act, a trust shall be deemed to be in respect of the trust property, an individual. As the context of subsection 104(2) and paragraph 251(2)a) of the Act do not otherwise require, the reference to the trust in paragraph 104(2) of the Act is a reference to the trustee having ownership or control of the trust property pursuant to paragraph 104(1) of the Act. Therefore, that trustee will be deemed to be an individual in respect of the trust property.
According to paragraph 251(2)(a) of the Act, related persons or persons related to each other are individuals connected by blood relationship, marriage or common-law partnership or adoption. The trustee will be an individual in respect of the trust property and if the beneficiary is an individual who is connected by blood relationship, marriage or common-law partnership or adoption to the trustee, the trust and the beneficiary will be related persons for the purpose of the Act including paragraph 116(6.1)(b) of the Act. Consequently, to be a treaty-exempt property for the purpose of subsection 116(6) of the Act, a related purchaser will have to provide notice under subsection 116(5.2) of the Act in respect of the disposition of a treaty-protected property by a non-resident person to a related purchaser.
In a particular situation, there may be many trustees having ownership and control of the trust property and, to determine whether the trust is related to a beneficiary pursuant to paragraph 251(2)(a) of the Act, the beneficiary may have to be related to all of those trustees.
We trust that our comments will be of assistance.
For Division Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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