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. can partial release/surrender of an income interest be made.
2. if yes to 1. above, does 69(1)(b) apply?
Position:
1. Yes
2. no
Reasons:
1. XXXXXXXXXX & Act refers to disposition of "part thereof"
2. XXXXXXXXXX value would be minimal if any; per IT385R 69(1)(b) no proceeds;
XXXXXXXXXX 952502
Attention: XXXXXXXXXX
XXXXXXXXXX, 1996
Dear Sirs:
Re: Advance Income Tax Ruling - XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX requesting an advance income tax ruling regarding the application of the Income Tax Act (Canada) (the "Act") to proposed transactions on behalf of XXXXXXXXXX We also acknowledge the additional information provided in your letter of XXXXXXXXXX.
We understand that to the best of your knowledge and that of the taxpayers involved:
(i)none of the issues involved in the requested rulings is being considered by an office of Revenue Canada in connection with a tax return already filed, and
(ii)none of the issues involved in the requested rulings is the subject of any notice of objection or is under appeal.
Our understanding of the facts, proposed transactions and purposes of the proposed transactions is as follows.
Facts
1.XXXXXXXXXX is the life tenant of XXXXXXXXXX trusts established in XXXXXXXXXX (collectively known as the "Trusts").
2.XXXXXXXXXX adult children, XXXXXXXXXX are the next generation of income beneficiaries of the Trusts.
XXXXXXXXXX
as the next succeeding income beneficiaries (to share equally) upon the death of XXXXXXXXXX as the next succeeding income beneficiary, upon the death of XXXXXXXXXX as income beneficiary upon the death of XXXXXXXXXX.
3.Each of the Trusts contain terms similar to the following paragraphs extracted from the XXXXXXXXXX Trust Deed instructing the Trustee:
XXXXXXXXXX
XXXXXXXXXX
Proposed Transactions
3.XXXXXXXXXX will, for no consideration validly release or surrender XXXXXXXXXX% of XXXXXXXXXX income interest in each of the Trusts in respect of future payments and will not direct in any manner who is entitled to receive the portion of trust income released or surrendered. XXXXXXXXXX will ensure through XXXXXXXXXX legal advisors that this release or surrender will comply with all laws relevant to such a transaction in the province of XXXXXXXXXX and will serve to accelerate the income interests of the successive beneficiaries.
Purpose of Proposed Transactions
4.XXXXXXXXXX does not require the full income entitlement to provide for XXXXXXXXXX current standard of living and therefore is desirous of surrendering a portion of XXXXXXXXXX income interest in each trust, thereby accelerating a portion of the income interests of XXXXXXXXXX children.
Ruling
Provided that the preceding statements are accurate and constitute complete disclosure of all the relevant facts, proposed transactions, and purpose thereof, and the proposed transactions are legally effective we confirm the following.
A.XXXXXXXXXX will not be considered to have received any proceeds of disposition for the purposes of subsection 106(2) of the Act as a result of executing partial releases or surrenders of XXXXXXXXXX income interest in each of the Trusts.
This ruling is given subject to the general limitations and qualifications set forth in Information Circular 70-6R2 dated September 28, 1990, and is binding on Revenue Canada provided that the partial releases or surrenders of the income interests in the Trusts by XXXXXXXXXX are completed by XXXXXXXXXX.
Nothing in this ruling should be construed as implying that Revenue Canada has provided any opinion on whether the acceleration of the successive income interests is the valid legal consequence of the contemplated partial releases.
Yours truly,
XXXXXXXXXX
for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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