13 August 1996 External T.I. 9610435 - INTER VIVOS TRUST, DISPOSITION TO BENEFICIARY

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 107(4.1) apply where 75(2) amount is nominal or person described in 107(4.1)(c) is a corporation?

2.Is a particular trust a personal trust or a prescribed trust (Reg 4800.1)?

Position:

1.Yes.

2.Insufficient information available to make determinations.

Reasons:

1.There is no carve out in 107(4.1) for nominal 75(2) amounts. Although 107(4.1)(c) uses the word "alive", this does not necessarily restrict the scope of the subsection to individuals (see for example 75(2)(b) and IT369R para 9).

2.We do not have all the facts. For example, it is not clear whether a person receives an interest in the trust by virtue of being a shareholder, or whether the payment made is for both shares and an interest in the trust (re personal trust). Sufficient facts are not available to ascertain whether purpose test is satisfied or to determine whether the trust is maintained primarily for benefit of employees (must weigh various criteria, number of employees, amount of assets held by each person, etc) (re prescribed trust).

									961043
XXXXXXXXXX							Denise Dalphy

Attention: XXXXXXXXXX

August 13, 1996

Dear Sirs:

Re: Distributions of Capital Interests in a Trust

This is in reply to your letters of March 22, 1996 and May 28, 1996, wherein you requested our opinion on a number of issues relating to shares held by an inter vivos trust.

Determinations as to whether a trust is a personal trust or a prescribed trust or whether subsection 107(4.1) of the Income Tax Act (the "Act") will apply in a particular situation require making a number of factual decisions. We have not been provided with all facts that could be relevant in making such determinations, and, as such, as discussed in our (XXXXXXXXXX/Dalphy) telephone conversation of July 17, 1996, we are unable to provide the determinations that you requested in the above-referenced letters.

With respect to subsection 107(4.1) of the Act, we offer the following comments. Paragraph (a) of that provision reads: "subsection 75(2) was applicable at any time in respect of any property of the trust," and consequently, the value of the property, nominal or otherwise, would not affect the application of the provision. It is also our opinion that the reference to a person in paragraph 107(4.1)(c) of the Act includes corporations; see by analogy paragraph 9 in Interpretation Bulletin IT-369R.

If your enquiry concerns a proposed transaction, we would be pleased to give further consideration to these issues in the context of an advance income tax ruling request, where all relevant, facts, documentation and other relevant information are available and those facts can be reasonably be expected to prevail. Alternatively, should you wish to receive the Department's opinion on a particular completed transaction, we would advise you to contact the relevant Tax Services Office.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch