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.
5-920460
24(1) A. Payette
(613) 957-8953
Attention: 19(1)
March 25, 1992
Dear Sirs:
Re: Deposits held in Trust
This in reply to your letter of February 11, 1992, wherein you requested our opinion as to whether or not deposits held in Trust, representing money put up in trust by the clients of a corporation operating a funeral home in Ontario, is an asset of the corporation used in an active business, for the purposes of the definition of "qualified small business corporation share" in subsection 110.6(1) of the Income Tax Act (the "Act") and for the purposes of the definition of "small business corporation" in subsection 248(1) of the Act. You also mention in your letter that, in the above situation, the client is the settlor of the Trust, and the corporation is the trustee.
Interpretation Bulletin IT-486R, dated December 31, 1987 entitled "Intergenerational Transfers of Shares of a Small Business Corporation" specifies that it is a question of fact whether an asset is used in an active business.
Subsections 34(1) and 34(2) of the Funeral Directors and Establishments Act in Chapter F.36 of the Revised Statutes of Ontario, 1990, state:
"34(1) Every person who receives a payment under a prepaid contract shall hold the amount of the payment together with all income accrued thereon in trust until it is disbursed in accordance with this Act and the regulations.
(2) If a prepaid contract is cancelled, the person holding the funds in trust under the contract shall forthwith pay the funds and all income accrued thereon to,
(a) if the prepaid contract is cancelled prior to the death of the beneficiary, the purchaser or the person set out in the contract;
(b) if the prepaid contract is cancelled prior to the death of the beneficiary but after the death of the purchaser, the beneficiary; or
(c) if the prepaid contract is cancelled after the death of the beneficiary, the estate of the beneficiary."
It is our opinion, based on the information you provided to us, that the money put in the trust by the clients of a corporation operating a Funeral Home in Ontario does not constitute an asset of the corporation since it is a property of the trust.
The foregoing comments are an expression of our opinion only and are not to be construed as an advance income tax ruling, and as such, are not binding upon Revenue Canada, Taxation.
Yours truly,
for Acting DirectorMerchandising, Manufacturing,Partnerships, Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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