19 April 1990 Ministerial Correspondence 5900364 F - Trust Designation - "Amounts Deemed not Paid"

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.

April 19, 1990

Dear Sirs:

Re: "Amounts Deemed Not Paid" Subsections 104(6), 104(13.1) and 104(13.2) of the Income Tax Act (the "Act")

This is further to our letter of December 1, 1989 concerning designations by a trust under subsections 104(13.1) and 104(13.2) of the Act.

After reconsidering the matter, it is our view that where an income beneficiary has agreed to bear the burden of a trust's tax liability arising out of a subsection 104(13.1) or (13.2) designation, the payment of the taxes by the beneficiary will not in and of itself result in either a contribution to the trust for the purpose of subparagraph 108(1)(i)(ii) of the Act or a gift to the trust for the purpose of paragraph 122(2)(d) of the Act. The amount paid by the beneficiary must be equal to the taxes payable by the trust on income that would have been received or receivable by the beneficiary but for the designation. The payment may be made either by

(a)     reimbursing the trustee,

(b)     giving the trustee a cheque made payable to the Receiver General, or

(c)     receiving a net amount from the trustee; i.e., an amount equal to the beneficiary's share of the income of the trust less his share of the taxes.

The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R. We trust however that they are of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate