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:
Transfer of property to a revocable living trust. Does paragraph (e) of section 54 apply?
Position:
No.
Reasons:
See Summary to file 6M11900 ("Summary")
951851
XXXXXXXXXX G. Kauppinen
(613) 957-4363
January 10, 1996
Dear XXXXXXXXXX:
Re: Revocable Inter Vivos Trusts
This is in reply to your letter dated July 8, 1995, concerning transfers of appreciated capital property to a revocable inter vivos trust (also referred to as a revocable living trust). We apologize for the delay in responding to your letter.
Our understanding of a revokable living trust is that pursuant to the terms of the Declaration of Trust: (1) the settlor is the trustee and, during his or her lifetime, is the sole income and capital beneficiary, (2) the settlor retains the ability to revoke, alter or amend the terms of the trust at any time, (3) the settlor has the ability to deal with the property as he or she sees fit during his or her lifetime, and (4) at the time of the settlor's death, the income and capital interests in the trust vest in other beneficiaries.
In your letter you advise that a transfer of property to such a trust is not a disposition for U.S. income tax purposes.
The definition of "disposition" in section 54 of the Income Tax Act (Canada) provides, in part, that a transfer of property to a trust is a disposition. An exception is made if there is a change of legal ownership of the property without any change in the beneficial ownership thereof. In the case of a revocable living trust, by virtue of point (4) above, the settlor would not retain all incidents of beneficial ownership. Consequently, the transfer of property to such a trust would be a disposition of the property at its fair market value.
The enclosed copy of Information Circular 72-17R4 outlines the procedures to be followed where a non-resident disposes of taxable Canadian property.
We trust our comments will be of assistance to you.
Yours truly,
T. Murphy
for Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
Attachment
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