19 August 1994 External T.I. 9415745 - DEFINITION OF BENEFICIARY

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.

		941574
XXXXXXXXXX	L. Holloway

Attention: XXXXXXXXXX

August 19, 1994

Dear Sirs:

Re: Request for Technical Interpretation - Definition of Beneficiary

This is in reply to your letter of June 9, 1994, wherein you requested a technical interpretation on the meaning of the term "beneficiary" of the Income Tax Act (the "Act"), in the situation outlined in the following paragraph.

A Trust owns common shares of a CCPC. The beneficiaries of the Trust are the husband, the wife and their children. The Trustee has total and absolute discretion as to the distribution of income and capital amongst the beneficiaries. The CCPC carries on the husband's business. The husband and wife are to be divorced and as part of the divorce settlement, the wife agrees to release or surrender all interests in the Trust and to be treated as if she had died with respect to the Trust. Also as part of the divorce settlement, the wife declares that she is no longer "beneficially interested" in the Trust or a "beneficiary" of the Trust as those terms are defined by the Act. The terms of the Trust will not be amended to reflect the above.

Our Comments

The scenario you have described appears to reflect an actual contemplated transaction, and as stated in paragraph 21 of Information Circular 70-6R2, we are not prepared to comment on specific contemplated transactions other than in the form of an advance income tax ruling. However, we can provide you with the following general comments.

You have used the term "disclaimer" in describing the relinquishment of the wife's rights under the trust agreement. As stated in paragraph 7 of IT-385R2, one cannot disclaim an interest that has already been accepted or acknowledged by the beneficiary. A disclaimer involves the refusal to accept an interest. It is a release or surrender which would be executed in respect of a property that has already been accepted by the taxpayer.

It is our opinion that a properly executed release or surrender of all of an individual's interests in a trust, including any right within the meaning of subsection 245(25) of the Act as well as any right to any other benefit or advantage under the trust, would result in that individual ceasing to be a beneficiary of the trust within the meaning of paragraph 108(1)(b) of the Act.

While we trust these comments will be of assistance, they do not constitute an advance income tax ruling and consequently, are not binding on Revenue Canada, Customs, Excise and Taxation.

Yours truly,

for Director
Manufacturing Industries, Partnerships
and Trusts Division
Rulings Directorate
Policy and Legislation Branch