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: Alter ego and joint partner trusts, impact of a duty to fund a life insurance policy
Position: General comments only - question of fact
CALU CRA Roundtable – May 2012
Question 3 – Alter Ego and Joint Partner Trusts
Could the CRA comment on Questions 2.2 – 2.4 in relation to the entitlement to the rollover of capital property in subsection 73(1) of the Act in the context of alter ego and joint partner trusts as described in subparagraph 73(1.01)(c)(ii) or (iii) and subsection 73(1.02) of the Act?
CRA Response
Question 2 addressed the potential tax treatment in circumstances where an exempt life insurance policy on the life of the surviving spouse is held by a spousal trust where the spousal trust is both the owner and beneficiary of the policy, or is merely the beneficiary of such policy.
It is the CRA published view that a duty to fund a life insurance policy out of trust capital or trust income would be one under which a person may obtain the use of trust capital or trust income; and as such, the existence of such a duty would be relevant in determining whether a rollover of property can occur to the trust under subparagraph 70(6)(b)(ii) of the Act. This view would equally apply for purposes of the rollover provision in subsection 73(1) of the Act.
Further, as noted in our response to question 2.2, this view applies consistently whether the trustee has an obligation or a mere power to encroach on the capital of a trust for the benefit of persons other than the surviving spouse or common-law partner. Please note however, that the specific questions asked of us in questions 2.3 and 2.4 relate to questions of fact and cannot be confirmed without a detailed review of all relevant factors.
Kim Duval
2012-043569
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