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:
Can income from a trust which represents income from the rental of real property be included in the computation of "earned income" for RRSP purposes?
Position TAKEN:
No
Reasons FOR POSITION TAKEN:
Property income to be included in earned income does not include income derived from an interest in a trust and tax policy with respect to trusts is that trusts are generally not "flow-through vehicles.
952386
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
September 28, 1995
Dear Sirs:
Re: Earned Income (Subsection 146(1) of the Income Tax Act)
This is in reply to your letter dated August 30, 1995, wherein you requested our comments as to whether a taxpayer may include income from a trust derived from the rental of real property in the computation of earned income for registered retirement savings plan ("RRSP") purposes. You have also enquired as to whether our position would be the same if the taxpayer is a life tenant (as defined in U.K trust law) beneficiary of a U.K. trust (i.e. a non-discretionary trust).
"Earned income" is defined in subsection 146(1) of the Income Tax Act (the "Act") and, for a period in the year throughout which the taxpayer was resident in Canada, includes income from property where the income is derived from the rental of real property. The reference to property income in the definition of earned income does not include income from an interest in a trust. In any case, the tax policy with respect to trusts, as suggested by subsection 108(5) of the Act, is that trusts generally are not "flow-through" vehicles. Consequently, income received from a trust, even though it may represent income from the rental of real property, would not be included in the computation of earned income for RRSP purposes.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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