22 March 1993 Income Tax Severed Letter 9307775 - Election under 104(13.1)—Trusts

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. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                           5-930777
XXXXXXXXXX                                 Marc Vanasse
                                           (613) 957-8953
Attention:  XXXXXXXXXX

March 22, 1993 Dear Sirs:

Re: Technical interpretation

This is in reply to your letter dated March 17, 1993 wherein you requested that we confirm our administrative position concerning designations by a trust under subsection 104(13.1) of the Income Tax Act (the "Act").

Where an income beneficiary has agreed to bear the burden of a trust's tax liability arising out of a designation made under subsection 104(13.1) or 104(13.2) of the Act, it is our view that the payment of the taxes by the beneficiary will not in and by itself result in either a contribution to the trust for the purposes of subparagraph 108(1)(i)(ii) of the Act or a gift to the trust for the purposes of paragraph 122(2)(d) of the Act. The amount paid by the beneficiary must equal the taxes payable by the trust on income deemed not to have been paid or payable to the beneficiary by virtue of the designation. The payment may be made either by:

(a) reimbursing the trustee,

     (b) giving the trustee a cheque payable to the
         Receiver General, or

     (c) receiving a net amount from the trustee; i.e an
         amount equal to the beneficiary's share of the
         income of the trust less his share of the taxes.

The above comments are an expression of opinion only and, as explained in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.

We trust our comments will be of some assistance.

Yours truly,

for Director Manufacturing Industries, Partnerships and Trusts Division Rulings Directorate Legislative and Intergovernmental Affairs Branch