15 December 1993 Income Tax Severed Letter 9327366 - Custodian and Information Return

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.

                                             December 15,1993

      T2 and T3 Programs Division            Head Office
      W.S. Hume                              Rulings Directorate
      Director                               (613) 957-8953
                                             Att'n: W. Mizuik
                                             Chief
                                             Information Returns Section
                                             932736

Subsection 204(1) of the Income Tax Regulations

As discussed in our telephone conversation of December 14, 1993 (Mizuik/Murphy), attached is a memorandum from J.A. Shepherd, of the Calgary District Office, concerning a query from XXXXXXXXXX regarding subsection 204(1) of the Income Tax Regulations (the "Regulations"). We are forwarding the file to you as the query pertains to a policy issue involving filing requirements.

Subsection 204(1) of the Regulations states:

Every person having the control of, or receiving the income, gains or profits in a fiduciary capacity, or in a capacity analogous to a fiduciary capacity, shall make a return in prescribed form in respect thereof.

J.A. Shepherd has expressed the view that a custodian appointed under a court order to have custody of the property of a member of a professional organization or a professional corporation for the purpose of managing, winding up or selling the professional practice of the member or professional corporation would be subject to subsection 204(1) of the Regulations.

In a November 16, 1993 letter (the "Letter"), XXXXXXXXXX states that the custodian is not a trustee. He further represents that there is no prescribed form for the custodian to file and that the Department could only require the custodian to comply with subsection 204(1) of the Regulations if it has issued a prescribed form that specifically applies to the custodian.

We note that to the extent a trust is not created, there is no requirement for the custodian to file a return under paragraph 150(1)(c) of the Act; although there may be a requirement to file under subsection 150(3) of the Act. However, pursuant to paragraph 221(1)(d) of the Act, the Governor in Council may make regulations requiring any class of persons to make information returns respecting any class of information required in connection with assessments under the Act. Those information returns would include those required to be filed in accordance with subsection 204(1) of the Regulations.

The T3 Guide and Information Return, page 4, states:

An agent, nominee or custodian not acting in a fiduciary capacity should file a T5 Return of Investment Income for payments of investment income, if acting on behalf of a resident of Canada.

The ancillary position is that a custodian acting in a fiduciary capacity is required to file a T3 Trust Income Tax Return and Information Return.

We agree that the broad wording in subsection 204(1) of the Regulations would require an information return to be filed by the custodian. As stated in a memorandum dated February 15, 1993, to your division:

XXXXXXXXXX

The district office has asked whether there is any administrative policy to relieve the custodian of the responsibility to file a return (information return) as required by subsection 204(1) of the Regulations. As well, XXXXXXXXXX has requested that the Department exercise discretion to confirm that subsection 204(1) of the Regulations does not apply to custodians. We are therefore forwarding the file to you for your consideration. Would you please send us a copy of your response to the Calgary District Office.

for Director Manufacturing Industries, Partnerships and Trusts Division Rulings Directorate

Attachments

c.c. J.A. Shepherd Room 454 Calgary District Office