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.
CANADIAN TAX FOUNDATION ROUND TABLE (November 1992 Conference)
Question 58
Offshore Trusts
Assume that an immigrant establishes a 60-month offshore trust which is exempted from the application of subsection 94(1) by virtue of subclause (b)(i)(A)(III) thereof. Consider the case where the immigrant is not the settlor or trustee of the trust but he is a beneficiary. The immigrant sells his assets to the trust for fair market value consideration in the form of a non-interest bearing promissory note payable on demand.
(a) Will subsection 56(4.1) apply to the indebtedness of the non- resident trust to the immigrant once he becomes a resident of Canada notwithstanding the exemption in subsection 94(1)?
(b) Will subsection 56(4.1) apply if the immigrant is not a beneficiary of the trust but his spouse and/or his children are beneficiaries?
Department's Position
In our view, once the immigrant's spouse and/or children have income from such a trust, the test in paragraph 56(4.1)(b) would likely be met. In such circumstances, whether or not the immigrant is a beneficiary of the trust, subsection 56(4.1) will apply (except to the extent that section 74.1 applies or would, but for subsection 74.5(3) apply, or section 75(2) applies) to any income derived from the trust by the immigrant's spouse and/or children.
Nothing in this response should be construed as Revenue Canada's views regarding the application of any other provisions of the Act in respect of the arrangement described in this question.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1992
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1992
Email this Content