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.
Principales Questions:
Where a trust is created for the benefit of a sole beneficiary and for each year throughout which the beneficiary is under 21 years of age (the "Beneficiary") the trustee is required to retain all the income in the trust and add it to the capital of the trust, does the fact that the trustee can make cash distributions from the capital of the trust, including the capitalized trust income, preclude the application of subsection 104(18) of the Act?
Position Adoptée:
The possibility to encroach on the capital of the trust for the benefit of the Beneficiary will not in and by itself preclude the application of subsection 104(18) of the Act.
Raisons POUR POSITION ADOPTÉE:
Wording of the subsection 104(18) XXXXXXXXXX
XXXXXXXXXX 5-970282
Attention: XXXXXXXXXX
June 23, 1997
Dear Sirs:
Re: Paragraph 104(18)(c) of the Income Tax Act
We are replying to your facsimile of February 3, 1997, wherein you requested a technical interpretation on paragraph 104(18)(c) of the Income Tax Act (the "Act").
As explained in Information Circular 70-6R3, it is not the Department's practice to comment on proposed transactions other than in the form of advance income tax rulings. Taxpayers seriously contemplating proposed transactions are best advised to seek a formal ruling, submitting a complete statement of facts and issues as well as copies of all relevant documents. Should your situation involve completed transactions, you should submit all relevant facts and documentation to the appropriate tax services office for their views. We are therefore not in a position to give you a definite response as to the application of the provisions of the Act. However, we can offer you the following general comments which may be of assistance although, in certain circumstances, they may not be appropriate to your specific situation.
In your facsimile you have described a situation where a trust is created for the benefit of a sole beneficiary. For each year throughout which the beneficiary is under 21 years of age (the "Beneficiary"), the trustee would be required to retain all the income in the trust and add it to the capital of the trust. The trustee will have the ability to make cash distributions from the capital of the trust, including the capitalized trust income, to the Beneficiary at any time.
It is our opinion that the possibility to encroach on the capital of the trust for the benefit of the Beneficiary will not, in and by itself, preclude the application of subsection 104(18) of the Act.
These comments represent our opinion of the law as it applies generally. As indicated in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996, this opinion is not a ruling and accordingly, is not binding on the Department.
Yours truly,
Marc Vanasse
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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