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:
Where the trust is a newly established trust can proposed subsection 132.2(2) be met?
Position TAKEN:
Yes.
Reasons FOR POSITION TAKEN:
Subsection 132(6) permits a fund to elect to have been a mutual fund since its inception. Also see file 3-942125.
951193
XXXXXXXXXX T. Murphy
Attention: XXXXXXXXXX
May 5, 1995
Dear Sirs:
Re: Mutual Fund Reorganizations
This is in reply to your letter of April 18, 1995 concerning mutual fund reorganizations. All references herein to sections or components thereof are references to the Income Tax Act unless otherwise indicated.
Proposed subsection 132.2(2) sets out the definition of "qualifying exchange" regarding mutual funds reorganizations, including a reorganization of a mutual fund corporation to a mutual fund trust. Where the trust is a newly established trust, the trust would not meet the requirements of subsection 132(6), specifically the 150 unit holder requirement set out in section 4801 of the Regulations under the Income Tax Act. Consequently, at the time of the transfer of the assets of the mutual fund corporation to the trust, the trust would not be a mutual fund trust as required by proposed subsection 132.2(2). However, the trust would meet the 150 unit holder requirement once it had issued units to the mutual fund corporation and the mutual fund corporation had transferred the units to its shareholders in exchange for their shares.
Given proposed paragraph 132.2(1)(a) and the postamble in subsection 132(6), you have enquired whether the newly established trust would meet the requirement in proposed subsection 132.2(2) that the transferee be a mutual fund trust at the transfer time provided it elects to have been a mutual fund trust since its inception pursuant to subsection 132(6).
In our opinion, the newly established trust would be a mutual fund trust at the transfer time in proposed subsection 132.2(2) provided that it otherwise meets the requirements to be a mutual fund trust as set out in paragraphs 132(6)(a) through (c) and it elects to have been a mutual fund trust since its inception pursuant to subsection 132(6).
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,
R.S. Biscaro
Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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