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.
QUESTION
A trust is established having as its trustees Indians situate on a reserve. The trust agreement provides that the beneficiaries of the trust are Indians situate on a reserve and that all of the income of the trust is payable in each taxation year of the trust to its beneficiaries. Will the trust's income received by the beneficiaries be considered to be the personal property of an Indian situated on a reserve for purposes of the exemption from taxation contained in the Indian Act?
DEPARTMENT'S POSITION
The Indian Act states in section 87 that the personal property of an Indian situated on a reserve is exempt from taxation. It was held in Metlakatla Ferry Service Ltd. v. R. 12 B.C.L.R.(2d) 308 37 D.L.R.(4th) 322, [1987] 2C.N.L.R.95 (C.A.) that property should not be confined to tangible, physical property. Income from a trust resident on a reserve when received by a status Indian beneficiary would be considered personal property of an Indian situated on a reserve and, thus, exempt from income tax pursuant to section 81(1)(a) of the Income Tax Act. The residence of a trust is a question of fact to be determined according to the circumstances in each case. However, a trust is generally considered to reside where the trustee who manages or controls the trust's assets resides-or where the majority of trustees who manage or control the trust's assets reside. (See Interpretation Bulletin IT-447, Residence of a Trust or Estate).
Canadian Tax Foundation - B.C. Conference September 1991 Glen Thornley Section 23
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