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.Where a resident of Canada acquires a property in satisfaction of an interest in a non-resident estate, is the cost base of the property determined by the rules in paragraph 69(1)(c) or paragraph 107(2)(b)?
2.If the non-resident estate is not subject to tax in Canada, would paragraph 69(1)(c) apply to determine the cost base of property acquired by a Canadian resident in satisfaction of that person's interest in the non-resident estate?
Position:
1.Paragraph 107(2)(b).
2.No. Paragraph 107(2)(b) applies.
Reasons:
1.Paragraph 107(2)(b) applies when property is distributed in satisfaction of a capital interest in a trust or estate.
2.Paragraph 107(2)(b) applies regardless of whether the non-resident estate is subject to tax in Canada. Previous opinions (E941969, E960222).
5-961381
XXXXXXXXXX J. Leigh
Attention: XXXXXXXXXX
July 29, 1996
Dear Sirs:
Re: Distribution of Property by a Non-resident Estate
This is in reply to your letter of April 15, 1996 in which you requested our views with respect to the determination of the cost base of property acquired by a resident of Canada in satisfaction of that person's interest in a non-resident estate.
Your question is very general in nature and the determination of the proper income tax consequences relating to any transaction between a beneficiary and an estate will depend on an analysis of all the relevant facts, documentation and other information pertaining to the particular situation. Written confirmation of the income tax consequences of particular transactions are provided only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990 and the Special Release thereto dated September 30, 1992, issued by Revenue Canada. However, we can offer the following general comments in response to your letter.
Where a non-resident estate that is a "personal trust", as defined in subsection 248(1) of the Income Tax Act (the "Act"), distributes property to a beneficiary resident in Canada in satisfaction of the beneficiary's capital interest in the estate, it is our view that paragraph 107(2)(b) of the Act would apply in determining the cost of the distributed property to the Canadian beneficiary. In our opinion, the length of time it takes for distribution to occur is not relevant in determining whether paragraph 107(2)(b) of the Act would apply to a particular situation.
In your letter you referred to our position that the 21-year deemed disposition rule does not apply to a non-resident trust that is not subject to tax in Canada. In your view, this interpretation seems to suggest that paragraph 107(2)(b) of the Act would not apply to non-resident trusts that are not subject to tax in Canada. Instead, paragraph 69(1)(c) of the Act would appear to have application. We are unable to confirm your view in this regard. It is our view that the reference to a trust in subsection 107(2) of the Act includes a non-resident trust even if it is not subject to income tax in Canada. Accordingly, paragraph 107(2)(b) of the Act would apply to distributions of property in satisfaction of a capital interest in any non-resident trust provided the trust is a personal trust.
We trust that our comments are of assistance to you.
Yours truly,
Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content