19 February 1992 External T.I. 9201505 F - Master Trust and Foreign Property

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.

                                                               5-920150

  24(1)                                                                           P. Spice

                                                                               (613) 957-8953

Attention:  19(1)

February 19, 1992

Dear Sirs:

Re:  Master Trust and Foreign Property Content

We are writing in reply to your letter of January 8, 1992, in which you ask us to confirm your understanding of the application of the Income Tax Act (the "Act") provisions as they relate to the above-noted matter.

Paragraph 205(a) of the Act lists both registered pension plans and master trusts as taxpayers which are subject to Part XI tax pursuant to subsection 206(2).  Therefore, a registered pension plan which is also a beneficiary of a master trust could be subject to tax on its excess foreign property held directly by it, and the master trust could be subject to the tax on excess foreign property held by it on behalf of its beneficiaries.

The pension plan's interest in the master trust is also a foreign property as defined in paragraph 206(1)(i), but this interest is excepted by Regulation 5000(1.2) of the Act so long as either the pension plan or the master trust does not own any foreign property.

Assuming the registered pension plan does not hold any foreign property in its own right, the master trust will be the only entity subject to the foreign property tax as described in subsection 206(2).  Alternatively, if an election is filed under section 259, the master trust will not be subject to Part XI tax and each beneficiary of the trust will be considered, for purposes of the tax, to own its proportionate share of the foreign property of the master trust.

With respect to the examples of foreign property holdings set out in your letter, if each of the participating plans holds foreign property in its own right, then each plan will be subject to Part XI tax on the aggregate of the cost amounts of its individual foreign properties and the cost amounts of the master trust's total foreign property holdings.  If, however, the foreign holdings described in your letter are only held within the master trust but differing proportions are allocated to each participating plan, then the foreign property content limits would be measured only at the master trust level.  Consequently, the proportion allocated to an individual pension plan could be higher than the limit set by subsection 206(2) of the Act without attracting Part XI tax, so long as the total for the master trust did not exceed the limit.

Although these comments are not binding on the Department, we hope they are of assistance.

Yours truly,

for Director Financial Industries DivisionRulings Directorate