23 March 1994 External T.I. 9236335 F - Preferred Beneficiary Election

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.

PRINCIPAL ISSUES:

Preferred Beneficiary Elections

POSITION TAKEN:

the divisor in par 2800(3)(f) of the regs includes contingent beneficiaries

REASONS FOR POSITION TAKEN:

IT-394R par 21

5-923633

XXXXXXXXXX                              Franklyn S. Gillman

Attention:  XXXXXXXXXX

March 23, 1994

Dear Sirs:

Re:  Paragraph 104(15)(c) of the Income Tax Act Preferred Beneficiary Elections

This is in reply to your letters dated December 4, 1992 and April 27, 1993 wherein you requested the Department's opinion regarding the application of the above-mentioned subsection of the Act as expressed at paragraph 21 in Interpretation Bulletin IT-394R.  We apologize for the delay in responding to your request.

We have reviewed your representations, however the Department maintains its position as expressed at paragraph 21 in IT-394R, where it states that:

"As described in 14 above, a preferred beneficiary with a capital interest in a trust may also have an income interest.  However, a preferred beneficiary whose right to the capital of such a trust is contingent on the death of another capital beneficiary will have a nil share in the accumulating income of the trust where the latter beneficiary is alive at the end of the year.  Nevertheless, the divisor in paragraph 2800(3)(f) of the Regulations will include such contingent preferred beneficiary."

We regret that our response was not more favourable.

Yours truly,

for DirectorManufacturing Industries,Partnerships and Trusts Division Rulings DirectorateLegislative and IntergovernmentalAffairs Branch