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:
Subsection 104(13.1) and spousal trust
Position TAKEN:
A designation under Subsection 104(13.1) will not, in and by itself, disqualify the trust as a spousal trust.
Reasons FOR POSITION TAKEN:
Position taken before CCM file #923042, 923634 and 932841.
XXXXXXXXXX 5-950139
Attention: XXXXXXXXXX
May 2, 1995
Dear Sirs:
Re: Spousal trust - Subsection 104(13.1) of the Income Tax Act
We are replying to your letter dated January 12, 1995 wherein you requested an interpretation concerning the taxation of a spousal testamentary trust. We acknowledge our telephone conversation of April 12, 1995 in which we obtained further clarifications regarding your concerns.
As explained in Information Circular 70-6R2, it is not the Department's practice to comment on proposed transactions other than in the form of advance income tax rulings. Taxpayers seriously contemplating proposed transactions are best advised to seek a formal ruling, submitting a complete statement of facts and issues as well as copies of all relevant documents. Should your situation involve completed transactions, you should submit all relevant facts and documentation to the appropriate tax services office for their views. We are therefore not in a position to give you a definite response as to the application of the provisions of the Income Tax Act (the "Act"). However, we can offer you the following general comments which may be of assistance although, in certain circumstances, they may not be appropriate to your specific situation.
Subsection 104(13.1) of the Act provides a mechanism for a trust by which it can designate an amount (subject to certain restrictions) to be deemed, for purposes of subsections 104(13) and 105(2) of the Act, not to have been paid or payable in the year to or for the benefit of the beneficiary.
The effect of this designation is that the amount designated will not be included in the beneficiary's income but will be taxed in the trust.
In our opinion, where a trust is a spousal trust a designation under subsection 104(13.1) of the Act to tax all or part of the trust's income in the trust will not, in and by itself, disqualify the trust as a spousal trust. Our view remains the same even though the beneficiary spouse is the sole trustee of the trust.
Furthermore, it is not necessary for the spouse to give up the right to receive actual distributions from trust income during the year in order for a designation pursuant to subsection 104(13.1) of the Act to be made. The designated amount will be taxable to the trust rather than to the spouse whether all or part of such amount is actually distributed to the spouse.
The above comments are an expression of opinion only and, as explained in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.
We trust that these comments will be of assistance to you.
Yours truly,
for Director
Manufacturing Industries,
Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1995
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1995
Email this Content