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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sir/Madam:
This is in reply to your letter dated December 13, 1993, requesting clarification as to whether the views expressed in paragraph 21 of Interpretation Bulletin IT-381R2 are also applicable for the purposes of subparagraph 108(1)(i)(iii) of the Income Tax Act (the "Act").
Paragraph 108(1)(i) of the Act defines "testamentary trust" as a trust that arose upon and in consequence of the death of an individual and was created by the deceased individual.
Back in 1985, the legislator found that the provisions were too restrictive since it would disqualify a trust which had received contributions by an individual, that were effected after his death.
Since it was not intended that a contribution to a trust by an individual that takes effect after the death of his surviving spouse would disqualify a trust as a testamentary trust, subparagraphs 108(1)(i)(ii) and (iii) were then amended to disqualify only those trusts receiving contributions otherwise than by an individual on or after his death and as a consequence thereof.
Paragraph 21 of IT-381R2 mentions that if an income beneficiary agrees to pay the trust's tax liability arising from a designation under subsection 104(13.1) or (13.2), the Department will not consider the payment of the tax liability to be a contribution under subparagraph 108(1)(i)(ii) or a gift under paragraph 122(2)(d) of the Act. Since subparagraphs 108(1)(i)(ii) and (iii) contained similarities in their wording, it is our opinion that the comments outlined in paragraph 21 of IT-381R2 would also apply to subparagraph 108(1)(i)(iii) of the Act.
As stated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, the above opinion does not constitute a ruling and accordingly, is not binding on Revenue Canada, Customs, Excise and Taxation.
Yours truly,
for DirectorManufacturing Industries, Partnerships and Trusts Division Rulings DirectorateLegislative and Intergovernmental Affairs Branch
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