24 April 1996 External T.I. 9605895 - 160(1)

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:

History on subsection 160(1) and predecessor sections as well as meaning of "property" and "transfer" at time the provision was originally enacted. Client also requested how to obtain access to federal government documents and departmental assessing policy and procedures.

Position TAKEN:

General comments on history of predecessor and related provisions of the various income tax legislation. Client directed to local public or university for less recent federal government documents. Departmental policy and procedures which have been released to the public are available for review in the reading area of the local TSO.

Reasons FOR POSITION TAKEN:

not applicable

		960589
XXXXXXXXXX			D. Zion

April 24, 1996

Dear XXXXXXXXXX:

Re: Subsection 160(1) of The Income Tax Act (the "Act")

This is in reply to your letter of January 12, 1996 regarding the above noted provision of the Act. More specifically, you have enquired as to how you may obtain access to federal government documents such as budget speeches or other materials that clarify the meaning of the words "transferred" and "property" at the time subsection 160(1) of the Act or its predecessor provisions were enacted. You have also requested information regarding the Department's policy on the application of subsection 160(1) of the Act.

Most universities and large public libraries contain specialized reference areas in which you should be able to review the types of documents with which you are concerned. We have reviewed some of the earlier tax reference materials which provide comments that may be helpful to you. You will note that these comments are on the predecessor provisions to subsection 74.1(1). This provision is related to subsection 160(1) of the Act, and is relevant in that both provisions address certain tax consequences arising from the transfer of property between spouses.

The legal meaning of "transfer" and "property" has not changed significantly since the introduction of the Income War Tax Act in 1917. The Income War Tax Act contained the Dominion income tax law that was applicable from 1917 to 1948. Although the terms "transfer" and "property" were not defined in the Income War Tax Act between 1917 and 1948, the ordinary meaning of the terms at that time and the tax implications, can be determined from a review of relevant tax commentary and jurisprudence. We located the following comments regarding the term "transfer":

The Canadian Tax Reporter, 1917 to 1948 Income War Tax Act Compilation: "by "transfer" is meant the passing of ownership in the property from one person to another by virtue of an act done by the transferor with the intention of so conveying ownership in the property." Regarding property, it contained the following comment: "property would appear to cover anything of value, including rights. According to Osborn's Concise Law Dictionary, 1927, "Property" means "That which is capable of ownership."

Dominion Tax Service, 1949: "Subsection 32(2) of the Income War Tax Act (predecessor to subsection 74.1(1) of the current Act) deals with a transfer between husband or wife or vice versa. This has always been forbidden under the Act. No transfer made after the 1st of August, 1917, as between husband and wife, will be recognized, and the income from such property as was transferred or from property substituted therefor will continue to be taxed in the hands of the donor, The word "transfer" is one of very wide meaning."

The Income War Tax Act was succeeded by The Income Tax Act S.C. 1948 C.52, which was effective in respect of all fiscal periods ending on and after January 1, 1949. Subsection 32(2) of the Income War Tax Act was replaced by subsection 21(1) of the subsequently enacted 1948 Income Tax Act. Subsection 21(1) read as follows: "Where a person has, on or after the first day of August, 1917, transferred property, either directly or indirectly, by means of a trust or by any other means whatsoever, to his spouse or to a person who has since become his spouse, the income for a taxation year from the property or from property substituted therefor shall be deemed to be income of the transferor and not of the transferee." This provision has evolved through the years to the version now contained in subsection 74.1(1) of the Act.

We have enclosed for your information Interpretation Bulletins, IT-510 and IT-511R, which contain comments regarding the application of subsection 160(1) of the Act. Further, departmental policy and procedures which have been approved for release to the public are available for review in the public reading area of your local tax services office, and could contain information which may be of interest to you.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch