3 February 1995 External T.I. 9417785 - TRANSFER TO A CHILD

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.

Principal Issues:

WHETHER FOR PURPOSES OF SUBSECTIONS 73(3), & (4) AND FORMER SUBSECTION 73(5) PROPERTY CAN BE TRANSFERRED TO A TRUST WHOSE ONLY BENEFICIARIES ARE TWO ADULT CHILDREN.

Position TAKEN:

NO.

Reasons FOR POSITION TAKEN:

SUBSECTIONS 73(3) & (4) AND FORMER SUBSECTION 73(5) REQUIRE THAT THE PROPERTY MUST BE TRANSFERRED TO A CHILD. THE ADMINISTRATIVE POSITION IN PARAGRAPH 21 OF IT-268R3 ONLY APPLIES WHERE PROPERTY IS TRANSFERRED TO A TRUST SOLELY FOR THE BENEFIT OF A MINOR CHILD.

 		941778
XXXXXXXXXX	W.P. Guglich

Attention: XXXXXXXXXX

February 3, 1995

Dear Sirs:

Re: Transfer of property to a child under subsection 73(3), 73(4) and former subsection 73(5) of the Income Tax Act ("the Act")

This is in reply to your letter of July 11, 1994 wherein you requested our views as to whether property would be considered to be transferred to a child in the hypothetical fact situation you described. We apologize for the delay in our response.

In the situation you described a taxpayer transfers qualifying property to a trust (the "Trust") whose beneficiaries are two adult children of the taxpayer.

Subsection 73(3), 73(4) and former 73(5) of the Act requires that the property must be transferred to a child. However, provided certain conditions are met, paragraph 21 of IT-268R3 sets out an administrative position permitting a transfer to a trust solely for the benefit of a minor child of property that qualifies for the rollover under subsection 73(3) or 73(4) of the Act. Paragraph 10 of IT-486R describes a similar administrative position respecting former subsection 73(5) of the Act. These administrative positions only apply where the child is a minor. In the case of an adult child the property must be transferred to the child.

We trust that our comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch