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:
Will paragraph 75(2)(b) apply where trustee' decisions require a majority vote and the settlor-trustee is not required to be part of the majority?
Position:
Generally, no.
Reasons:
The requisite consent or direction is not present.
971781
XXXXXXXXXX T. Murphy
Attention: XXXXXXXXXX
November 19, 1997
Dear Sirs:
Re: Subsection 75(2) of the Income Tax Act
This is in reply to your letter of June 20, 1997, concerning subsection 75(2) where the settlor is one of the three trustees of an inter vivos discretionary trust.
In your letter you refer to document #9514275 wherein the settlor was one of the three trustees. All decisions required a majority vote of the trustees and the settlor had to be in the majority. Our response indicated that subsection 75(2) would apply as "the property held by the trust could only be disposed of with the consent or in accordance with the direction of the settlor of the trust." Furthermore, we said that our answer "...would be the same if the trust agreement did not contain a majority rule provision but instead required the unanimity of all trustees."
You ask whether we would consider subsection 75(2) to apply if a majority vote is required and the settlor-trustee is not required to be a part of the majority.
The document referred to above considered the application of paragraph 75(2)(b). With regards to that paragraph, we generally agree that it would not apply where a majority vote is required and the settlor-trustee is not required to be part of the majority vote. It could still apply however where the trust contains terms and conditions that require the trustees to obtain the settlor-trustee's consent or direction notwithstanding the majority vote.
While we trust our comments are of assistance to you, please note that they do not constitute an advance income tax ruling and, consequently, they are not binding on Revenue Canada.
Yours truly,
Director
Resources, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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