15 February 1993 External T.I. 9233505 F - Beneficiaries & Benefits - Payment To

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.

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Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Income Paid from Trust to Minors

This is in reply to your letter dated November 4, 1992, whereby you request an interpretation of the provisions of paragraph 104(6)(b) of the Income Tax Act (the "Act") in light of the Tax Court of Canada decision in The Howard Langer Family Trust v. M.N.R., 92 DTC 1055.

It appears to you that the Judge's interpretation with respect to the amounts that were conceded by the Minister in Langer was that since the amounts were not paid directly to the beneficiaries, they are not considered payable under subsection 104(24) of the Act and therefore are not deductible under subsection 104(6) of the Act. This is not Revenue Canada's position. We consider the Judge's comments with respect to the Minister's concession as an obiter. The Judge commented as follows:

     "...The Court makes no specific adverse comment on these concessions by the respondent... That concession does lead to the basic question underlying these appeals regarding the proprietorship, control, and authority for payment for the funds allegedly expended for the beneficiaries..."

     (underlining is ours).

The Langer decision was rendered based on specific facts and would not influence the characterization of properly documented payments made in accordance with a trust deed.

Pursuant to subsection 104(18) of the Act, income is considered to be payable for purposes of subsections 104(6) and (13) where

(a)     the income is held in trust for a minor whose right thereto has vested, and

(b)     the only reason that it was not payable was because the beneficiary was a minor.

An amount payable does not have to be paid in cash. Tuition fees, medical expenses or other expenses incurred for a minor beneficiary's benefit will be considered to be income payable to the beneficiary. If a reimbursement of such payment is made to the parent of the beneficiary for the only reason that the beneficiary is a minor, it will still be considered to have been paid to the beneficiary. However, we would like to draw your attention to the provisions of subsection 74.1(2) of the Act which may attribute the income to the person who has transferred or loaned property to the trust.

We trust that the above comments will be of assistance to you.

Yours truly,

for Acting Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch