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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
5-922442
XXXXXXXXXX Franklyn S. Gillman
(613) 957-8953
Attention: XXXXXXXXXX
December 16, 1992
Dear Sirs:
Re: Subsection 75(2) of the Income Tax Act (the "Act") Income Attributed to the Trust's Settlor
This is in reply to your letter dated August 12, 1992 wherein you requested the Department's opinion regarding the application of the above-mentioned subsection of the Act.
The Department has expressed it's opinion with regards to this particular issue previously during the 1991 Canadian Tax Foundation Conference at question 8 of the round table. The reply given at that time was as follows:
- "The applicability of subsection 75(2) cannot be based on a single factor but must be determined on the basis of all relevant terms and conditions of a trust and any loans or transfers of property to it.
- (1) In this first situation, a genuine loan to a trust would not, in and by itself, be considered to result in property being held in the trust on the conditions listed in paragraphs 75(2)(a) and (b), assuming that the loan is outside and independent of the terms of the trust.
- The department's views on the conditions to be met for a loan to be considered genuine are discussed in paragraph 8 of Interpretation Bulletin IT-258R2 and paragraph 3 of IT-260R.
- (b) With respect to the second situation, other forms of indebtedness --- for instance, the unpaid purchase price of property sold to a trust --- do not constitute loans and are not subject to the comments on loans. The terms of the indebtedness will, however, be relevant in determining whether a transfer of a property constitutes an unconditional bona fide sale. Where there is a bona fide sale, the fact that the purchase price is unpaid will not, in and by itself, result in the application of subsection 75(2).
- These positions will ordinarily apply whether or not the person making the loan or selling the income-producing property is the settlor of the trust, the sole trustee of the trust, or both."
We trust these comments will be of assistance.
Yours truly,
for Director
Manufacturing Industries,
Partnerships and Trusts Division
Rulings Directorate
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