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.
MINISTER/DM'S OFFICE Y.S. 93-5839T ADM'S OFFICE CENTRAL RECORDS RETURN TO RULINGS, ROOM 303, MET. BLDG. AUTHOR,OF CORPORATE CASE FILE
December 12, 1993
XXXXXXXXXX
Dear XXXXXXXXXX
I am replying to your letter of September 9, 1993, addressed to the Honourable Garth Turner, former Minister of National Revenue, 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, I can assure you that you will not be required to pay tax on the annual earnings on the funds held in trust.
I appreciate your interest in this matter and hope that I have addressed your concerns.
Yours sincerely,Pierre Gravelle, Q.C.
Cal Brown
957-2131
932737
November 24, 1993
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