29 January 1993 Income Tax Severed Letter 930041A - Transfer to Charitable Remainder Trust

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.

930041
XXXXXXXXXX W.P. Guglich
(613) 957-2102

Attention: XXXXXXXXXX

January 29, 1993

Dear Sirs:

Re: Charitable Donation

This is in reply to your letter of January 5, 1993 wherein you request our views regarding the transfer, by a ninety year old individual, of funds to a Charitable Remainder Trust (the "Trust") in the following situation:

• 1. The donor is to retain a portion of his Canada Savings Bonds of approximately $75,000 in order to maintain himself.
• 2. The donor would settle the balance of his funds into the Trust.
• 3. An election under subsection 118.1(6) of the Act will be made.
• 4. A registered charity would be the income beneficiary.
• 5. The donor would be a capital beneficiary entitled to receive up to $2,000 of capital each month until his death.
• 6. The Trust would be wound up on the Donor's death and the remaining capital would be distributed to the registered charity.

You request our views as to whether:

• 1. The income payable to the charity would be included in computing the charity's income for the year and no amount would be attributed to the donor?
• 2. The subsection 118.1(6) election would be available to the donor?
• 3. The charity could accept such an arrangement and not be considered as engaging in the annuities and insurance business so as to impair its registered charity status?

Our Views

As the donor is entitled to receive up to $2,000 of capital per month subsection 75(2) of the Act would apply to attribute the income to the donor.

As the value of the residual interest and income interest is not reasonably ascertainable in that the donor is entitled to receive up to $2,000 of capital per month no deduction in respect of a charitable donation will be allowed. Please refer to paragraph 4 of Interpretation Bulletin IT-226.

The determination as to whether the charity as a result of the above arrangement would be considered to carry on the annuities and life insurance business is a question of fact dependent upon all the circumstances.

The foregoing comments represent our general views with respect to the subject matter of your letter. The facts of a particular situation may lead to different conclusions.

We trust our comments will be of assistance.

Yours truly,

E. Wheeler
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch