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:
(1) When do interests in a pre-72 spousal trust vest indefeasibly for purposes of (g) of definition of trust?
(2) Would there be a disposition of the income interest on death of the spouse?
Position TAKEN:
(1) Test in (g) of definition of trust applies on an on-going basis.
(2) No.
Reasons FOR POSITION TAKEN:
(1) Reading of Act. Also see explanatory notes.
(2) reading of Act. Also see Raphael page 459.
942744
XXXXXXXXXX T. Murphy
Attention: XXXXXXXXXX
January 5, 1995
Dear Sirs:
Re: Paragraphs 104(4)(a.1) and (g) of the definition of trust in subsection 108(1) of the Income Tax Act
This is in reply to your letter of October 24, 1994 wherein you enquired:
1.at what point in time must all interests in a pre-1972 spousal trust be vested indefeasibly in order for the exclusion in paragraph (g) of the definition of trust in subsection 108(1) to apply so as to preclude a deemed disposition under paragraph 104(4)(a.1) (the "21-year rule"); and
2.whether the termination of an income interest in a pre-1972 spousal trust on the death of the spouse would result in a disposition by the spouse for income tax purposes.
Our responses:
1.In our opinion, paragraph (g) of the definition of trust is meant to apply on an on-going basis. Thus, if all interests in the trust are vested indefeasibly on the day the 21-year rule would otherwise apply, the requirements of paragraph (g) of the definition of trust would be satisfied and thus the 21-year rule would not apply.
2.Subsections 106(1) and (2) deal with dispositions of income interests (defined in subsection 108(1)). On the death of a spouse who held an income interest in a pre-1972 spousal trust, the income interest would be extinguished and would not be considered as disposed of for purposes of subsections 106(1) and (2).
The above comments represent our opinion of the law as it applies generally. This opinion is not an advance income tax ruling and, consequently, it is not binding on Revenue Canada.
We trust our comments will be of assistance to you.
Yours truly,
A/Director
Manufacturing Industries, Partnerships
and Trusts Division
Rulings Directorate
Policy and Legislation Branch
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