26 April 1991 Ministerial Letter 9107418 F - Basic Exemption of Multiple Trusts

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.

8-910741

Subject: 24(1)

This is reply to your memorandum of March 13, 1991, regarding the application of the provisions in subsection 127.53(2) and (3) of the above mentioned trust.

Facts (from your file)

1)     

2)     

3)     24(1)

4)     

5)     

6)     

Issue: 

Can each trust obtain the $40,000 exemption referred to in subsection 127.53(1) or must it be shared per subsection 127.53(2) and (3).

Taxpayer's Position: 

Subsection 127.53(2) and (3) are not applicable because they refer to trusts that arose as a consequence of contributions to the trusts by an individual whereas

24(1)

Analysis:

Subsection 127.53(2) and (3) require the $40,000 exemption to be shared among trusts "where more than one trust.... arose as a consequence of contributions to the trust by an individual".  The intent of the subsection is to apportion the $40,000 exemption among all of the trusts to which a particular individual has contributed property.  It does not seem to be relevant that someone else also contributed property to some or all of the trusts.

Furthermore, If there were two original contributors to a trust it cannot be argued that the trust did not arise from contributions from either one alone.  A trust would still have come into existence if there was only one contributor.  There are numerous references in the Act to a taxpayer, an employee, or an individual where the intent is to apply the particular provision to one or more of them.  To accept the taxpayer's argument would be to accept that the subsection would not apply if a husband and wife contributed property to trusts for their children but would apply if either a husband or wife contributed the property.

The taxpayer's other argument, that no contributions were made, is not possible because if there was no contribution of property there can be no trust.  The criteria for the existence of a trust are listed on page 6679 of Kingsdale Securities Co. Ltd. vs M.N.R. (74 DTC 6674).  These criteria, referred to as the three certainties, are property, intent of the trust, and beneficiaries.  A trust results when a settlor contributes property to a trustee to be held for a beneficiary.

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The facts of this situation are unclear making it difficult to determine exactly when the contribution to the trusts was made.

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As indicated on page 6392 of Atinco Paper Products Ltd. vs the Queen (78DTC 6387) "the words employed must be so crouched that, taken as a whole, they ought to be constructed as imperative".  If there was no requirement at the time of purchase to hold such property in trust then no trust existed.  The wording of the trust agreement (page 1)

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As indicated in paragraph 5 of IT-374, a contribution equals the excess of the fair market value of the property over the fair market value of the consideration given.

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for DirectorFinancial Industries DivisionRulings Directorate