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:
Does a Care and Maintenance Fund established pursuant to the Cemeteries Act (Revised) (Ontario) qualify as a trust governed by an eligible funeral arrangement (as defined in subsection 148.1(1) of the Act)?
Position:
Yes, if the contribution limit of $15,000 per individual for funeral services is not exceeded.
Reasons:
The words "cemetery arrangements" in the definition of "funeral services" in subsection 148.1(1) were intended to include Care and Maintenance Funds and are broad enough to do so.
961987
XXXXXXXXXX C.R. Bowen
Attention: XXXXXXXXXX
June 11, 1996
Dear Sirs:
We are writing in reply to your letter dated May 31, 1996, wherein you requested our technical interpretation of whether a Care and Maintenance Fund, established pursuant to section 35 of the Cemeteries Act (Revised) (Ontario) R.S.O. 1990, c. C.-4 (the "Cemeteries Act"), qualifies as a trust governed by an eligible funeral arrangement.
As noted in your letter, the definition of an eligible funeral arrangement in subsection 148.1(1) of the Income Tax Act (the "Act") requires, among other things, that the arrangement be established and maintained solely for the purpose of funding funeral services. It is our opinion that the words "cemetery arrangements" contained in the definition of funeral services include arrangements established pursuant to the Cemeteries Act for the perpetual care and maintenance of a cemetery. Therefore, a Care and Maintenance Fund will be a trust governed by an eligible funeral arrangement if the contribution limit (as discussed below) is not exceeded.
Where contributions made in respect of an individual for the provision of all funeral services (including those made to a Care and Maintenance Fund) exceed the $15,000 contribution limit contained in the definition of eligible funeral arrangement, that definition will not be met. It is only the contributions (or money paid) by the purchaser of funeral services that are relevant in determining whether the contribution limit in respect of an individual has been exceeded and not the amount that accumulates over time as a result of investing the initial contribution. In the case of a Care and Maintenance Fund, the income (e.g., interest income) earned on the contributions to the fund is paid to the cemetery owner each year and included in its income, while any capital gains that arise are retained in the trust. Pursuant to paragraph 149(1)(s.1) of the Act, effective for 1993 and subsequent taxation years, no income tax is payable on the taxable income (including any taxable capital gains) earned by a Care and Maintenance Fund that qualifies as a trust governed by an eligible funeral arrangement. In addition, such a trust will be exempt from filing a T3 trust income tax and information return, T3 Summary and T3 Supplementary (a "T3 Return") pursuant to proposed paragraph 204(3)(d) of the Income Tax Regulations (the "Regulations"). The trustee of such a trust will only be required to file a T3 Return for that trust's 1993 and subsequent taxation years if the proposed paragraph is not passed.
If a particular Care and Maintenance Fund that qualifies as a trust governed by an eligible funeral arrangement has paid income taxes as a result of filing a T3 Return for its 1993 or any subsequent taxation year, the trustee of that trust should advise the Revenue Canada office where the T3 Return was filed of the trust's status and request a reassessment of the return(s) in order to obtain a refund of the income taxes paid.
Pursuant to the Cemeteries Act, the contribution made by the purchaser of internment rights, a percentage of which is paid into a Care and Maintenance Fund, can not be returned to either the purchaser or another taxpayer. As a result, subsection 148.1(3) of the Act, which requires an income inclusion for amounts distributed to a taxpayer on the return of funds from an eligible funeral arrangement, would not apply to such a contribution. Therefore, the trustee of a Care and Maintenance Fund would not be required to file the information return (i.e., T5 Slips) referred in draft section 237 of the Regulations.
Our comments are provided in accordance with paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.
Yours truly,
for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
b.c. Pat McLauglin
T1 and T3 Processing Division
9th floor, 400 Cumberland
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