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) Where unknown property of an estate is discovered after the property of the estate has been distributed to the beneficiaries, must the beneficiaries include any amount in their income? In this case, the property is the proceeds of shares redeemed in 1989 and the beneficiaries tax returns for that year are statute-barred.
2) Was there in any negligence or carelessness in the fact situation (per 152(4))?
Position TAKEN:
1) No amount can be included in their income unless the statute-barred returns can be re-assessed in accordance with 152(4)(a).
2) A letter will be sent to the Toronto Centre Tax Services office requesting that they make that determination.
Reasons FOR POSITION TAKEN:
1) The taxable event happened in a statute-barred year of the beneficiaries
2) A determination under 152(4)(a) can only be made after an audit is conducted. Per Mr. Lefebvre (ADM)'s instructions, Audit Directorate was consulted before preparing the response and they agreed that without obtaining more facts a determination under 152(4)(a) could not be made.
ADM'S OFFICE (2) A.D.M. 950485
RETURN TO INCOME TAX RULINGS AND
INTERPRETATIONS, 15TH FLOOR, 25 NICHOLAS ST.
AUTHOR
SUBJECT OR CORPORATE CASE FILE
April 27, 1995
XXXXXXXXXX
Dear XXXXXXXXXX:
I am replying to your letter of March 22, 1995, wherein you requested confirmation of the income tax consequences of a transaction that recently came to the attention of the executors of theXXXXXXXXXX and the beneficiaries of his will.
While I am unable to provide confirmation of the income tax consequences of your actual fact situation, as such a determination can only be made by your clients' local Tax Services office, the following general comments may be of assistance to you.
After all the known property of a trust (estate) established for a limited period of time pursuant to the terms of a will has been distributed to its beneficiaries and the trust terminated, additional property of the deceased that would otherwise have been property owned in the trust may be discovered. That property which would have vested in the beneficiaries in accordance with the terms of the will is generally considered to be owned by the beneficiaries from the time the trust terminated (even though the existence of the additional property was unknown). Should such property be shares of a corporation which were redeemed after the trust terminated and the redemption proceeds held "in trust" by the corporation until such time as the owners of the shares were ascertained, the beneficiaries would be required to include in their income in the year the shares were redeemed their share of any deemed dividend and capital gain or capital loss arising from the disposition of the shares.
If the income tax returns of the beneficiaries for that year are statute-barred, those returns would not be reassessed to include any amount in the beneficiaries' income unless it could be determined that the omission was attributable to neglect, carelessness, wilful default or fraud. As such a determination by Revenue Canada can only be made after a thorough review of all the relevant facts of a particular situation, a copy of your letter is being sent to Pierre St. Laurent, Assistant Director of Verification and Enforcement, Toronto Centre Tax Services, in order that someone from that office may contact you on this matter.
I hope that I have addressed your concerns.
Yours sincerely,
Denis Lefebvre
Interim Assistant Deputy Minister
Policy and Legislation Branch
b.c. Mrs. Susan Fleming
Chief of Appeals
Toronto Centre Tax Services
Attachment
Catherine Bowen
957-2131
950871
April 12, 1995
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