21 March 1990 Ruling 59603 F - Testamentary Trust Designator

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.

March 21, 1990

Dear Sirs:

This is in reply to your letter dated February 13, 1990 in which you raised a number of questions concerning the application of subsections 104(6), (13.1) and (13.2) of the Income Tax Act ("Act") to the following facts.

24(1)

Our comments follow the order of your questions.

1.     The combined application of paragraph 104(6)(b) and subsection 104(13.1) of the Act would enable a trustee of a testamentary trust to elect to tax income in the trust using the marginal rates of tax for a testamentary trust.  However, we are concerned about whether the payment of Part 1 tax by the trust may constitute an indirect contribution by the beneficiary to the trust for purposes of subparagraph 108(1)(i)(ii) of the Act.

     We are currently renewing our position concerning the income tax consequence where a testamentary trust has made a designation under subsection 104(13.1) of the Act. Upon the completion of our review, we will write to you further.

2 & 3.   It is not uncommon for the trustee of a testamentary spousal trust to have discretionary powers concerning, for example, the payment of trust capital to the income beneficiary. Presumably, the trustee also needs to have the necessary authority under the relevant will, trust deed, etc. in order to make the designations required under subsection 104(13.1) or (13.2) of the Act.

4.     Refer to our comments under 1 above.

5.     Subsections 104(13.1) and (13.2) of the Act do not set out or prescribe the manner for making the designations provided for thereunder.  Accordingly, we suggest that you contact the relevant officials at your local district taxation office to ascertain what administrative procedure is to be followed in the case of those designations when one files a 1989 T3 Trust Return.

We trust that our comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate