2 August 1996 External T.I. 9625775 - "FINANCIAL INSTITUTION" - MUTUAL FUND TRUST EXCLUSION

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:

If a trust makes an election under proposed subsection 132(6.1), as reflected in the June 20, 1996 Notice of Ways and Means Motion, and is deemed to have been a mutual fund trust for a particular period, would it also constitute a mutual fund trust for the purposes of the definition of "financial institution" in subsection 142.2(1) during that period?

Position:

Yes.

Reasons:

The proposed amendment moves the election to have been a mutual fund trust from subsection 132(6), which expressly applies only for the purposes of section 132, to new subsection 132(6.1) which does not contain such a restriction.

		962577
XXXXXXXXXX	A.A. Cameron

Attention: XXXXXXXXXX

August 2, 1996

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling #960651 dated May 9, 1996 (the "Ruling")

This is in reply to your letter of July 26, 1996, wherein you requested our views with regard to the application to the Trust of the provisions of proposed subsection 132(6.1) of the Income Tax Act (the "Act") as contained in the Notice of Ways and Means Motion tabled in the House of Commons by the Minister of Finance on June 20, 1996 (the "Notice"). The Trust was created pursuant to a trust indenture dated XXXXXXXXXX and is described in more detail in paragraphs 15 through 18 of the Ruling.

Our Comments

Provided that:

i)subsection 132(6.1) of the Act is enacted in substantially the same form as that contained in the Notice;

ii)the Trust becomes a "mutual fund trust", within the meaning assigned that term in subsection 132(6) of the Act, at a particular time before XXXXXXXXXX when an election of the type described in paragraph 40 of the Ruling ( XXXXXXXXXX ) has not previously been made by or on behalf of the Trust; and

iii)the Trust makes the election contemplated by proposed subsection 132(6.1) of the Act in its return of income under Part I of the Act for its first taxation year for purposes of the Act;

it is our opinion that the Trust will be deemed pursuant to the provisions of proposed subsection 132(6.1) of the Act to have been a mutual fund trust from the beginning of its first taxation year until the particular time referred to in ii) above. In addition, it is also our opinion that if the Trust is so deemed to have been a mutual fund trust, it would also constitute a mutual fund trust for the purposes of paragraph (d) to the definition "financial institution" contained in subsection 142.2(1) of the Act from the beginning of its first taxation year until the particular time referred to in ii) above.

The foregoing opinions are not advance income tax rulings and, as explained in paragraph 21 of Information Circular 70-6R2, are not binding on Revenue Canada.

Yours truly,

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