8 December 1993 Income Tax Severed Letter 9321468 - Prepaid Funeral Services

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.

MINISTER/DM'S OFFICE                           Y.S. 93-4389T
ADM'S OFFICE
CENTRAL RECORDS
RETURN TO RULINGS, ROOM 303, MET. BLDG.
AUTHOR
SUBJECT OF CORPORATE CASE FILE

December 8, 1993

XXXXXXXXXX

Dear XXXXXXXXXX

          I am replying to your letter of July 7, 1993,
addressed to the Honourable Garth Turner, former Minister of
National Revenue, on behalf of your constituent, concerning
the taxation of interest received on funds held in trust to
provide funeral services.  I apologize for the delay
in replying.

          Previously, the Department's administrative
practice had been to permit the reporting of all interest
accumulated on prepaid funeral arrangements either by the
contributor at the time of withdrawal upon cancellation of
the contract, or by the funeral director at the time the
monies were applied against the cost of the services
provided by the funeral home.

          This administrative practice was developed before
1976 when few provinces had specific legislation in place
concerning these arrangements.  Since then, legislation has
been implemented by most of the provinces whereby the funds
are held in trust on behalf of the individual contributor
until they are applied to pay funeral expenses or the
arrangement is cancelled.

          The Department interprets the income tax law, as
it applies to the present provincial regimes, to require
that contributors report the interest earned annually.  On
May 1, 1992, we advised funeral service associations across
the country of this position and indicated that
Interpretation Bulletin 
IT-246
 would be revised.

          Nevertheless, in subsequent meetings with
representatives of The Funeral Service Association of
Canada, the Department agreed to delay until 1993 the
implementation of the changes set out in our letter of May
1, 1992.  This delay was to allow time to solve the
administrative difficulties faced by trustees in
implementing a reporting system.  However, I have recently
been informed that the Department of Finance is considering
an amendment to the law which will legislate the
administrative practice set out in 
IT-246
.  It is intended
that this legislation be effective for the 1993 taxation
year.

          In view of this proposed amendment, the
Interpretation Bulletin will not be revised at this time and
the Department will continue the administrative practice
described above.  Consequently, the contributor will not be
required to report the annual interest.

          I trust that my comments have addressed your
concerns.

                                     Yours sincerely,

                                     Pierre Gravelle, Q.C.

Cal Brown 957-2131 932146 November 24, 1993