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.
(1)Does the extention of the termination date of a trust result in:
(a) the disposition by the trust of the trust's property and the creation of new trusts?
(b) the disposition of property by the beneficiaries or a disposition of the beneficiaries capital or income interests in the trust?
(2)Will subsection 122(2) still apply to the trust? In particular, will the test in paragraph (a) still be met?
(1)(a) No. (1)(b) No. (2) subsection 122(2) will still apply.
The extension of the termination date does not result in a change in the property held by the trust or the income or capital interests of the beneficiairies. Therefore it is the Department's position that extending the termination date does not result in any dispositions.
The extention of the termination date does not result in a material variation of the trust or the interests therein. Therefore it is the Department's position that the date the trust was established is not changed by the extension of the trust's termination date.
Advance Income Tax Ruling
This is in reply to your letter dated XXXXXXXXXX and your facsimile dated XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayers.
To the best of your knowledge, and that of the taxpayers involved, none of the issues contained herein is being considered by a tax services office or a taxation centre in connection with any tax return already filed and none of the issues is under objection or appeal.
In this letter, the following terms have the meanings specified:
(a)unless otherwise indicated, all references to statute are to the Income Tax Act (the "Act");
(b)"arm's length" has the meaning assigned by subsection 251(1) of the Act;
(c)"inter-vivos trust" has the meaning assigned by subsection 108(1) of the Act;
(d)"Mr. Q.C." is XXXXXXXXXX;
(e)"Trust Y" is the XXXXXXXXXX;
(f)"Trust Z" is the XXXXXXXXXX;
(g)"X" is XXXXXXXXXX;
(h)"Y" is XXXXXXXXXX;
(i)"Z" is XXXXXXXXXX;
Trust Y and Trust Z, hereinafter collectively referred to as the "Trusts", are inter-vivos trusts established on XXXXXXXXXX. The settlor of each of the Trusts was X. The sole beneficiary of Trust Y is Y and the sole beneficiary of Trust Z is Z. Y and Z are the children of X. Mr. Q.C. and Y are the trustees of Trust Y and Mr. Q.C. and Z are the trustees of Trust Z.
The address of the Trusts is XXXXXXXXXX. The Trusts file their trust tax returns at the XXXXXXXXXX Taxation Centre and deal with the XXXXXXXXXX Tax Services Office. The address and social insurance number of each of the beneficiaries is as follows:
The Trusts jointly hold various XXXXXXXXXX properties which are leased at market value rates to a group of privately owned companies.
The trust documents of Trust Y and Trust Z (XXXXXXXXXX) provide for the windup of each of the Trusts and the distribution of the Trusts' property to Y and Z, respectively, on XXXXXXXXXX.
The Trusts are trusts that meet all of the conditions set out in subsection 122(2) of the Act such that they are taxed at personal income tax rates.
The trustees for each of Trust Y and Trust Z have filed an election under subsection 104(5.3) of the Act to defer the subsection 104(4) deemed realization day of Trust Y and Trust Z, respectively.
By written agreement, the settlor, the settlor's wife, the settlor's sole sibling, the trustees, the children of Y and Z and the Official Guardian of the Province of XXXXXXXXXX for any beneficiary who is unborn or unascertained, will agree, as applicable, to vary each of Trust Y and Trust Z to extend the distribution date to XXXXXXXXXX. Specifically, it is proposed that all references to XXXXXXXXXX in amended Schedule A of the trust indentures of the Trusts will be changed to XXXXXXXXXX. This change will be the only change made to the existing trust indentures and attached schedules. Once approval has been received from the Official Guardian, an application will be made to the XXXXXXXXXX Court (General Division), pursuant to the Variation of Trusts Act, for the approval to vary the terms of the Trusts. It is anticipated that an order will be forthcoming from the Court to vary the terms of the Trusts. The terms of the Trusts will then be legally varied before XXXXXXXXXX.
PURPOSE OF THE PROPOSED TRANSACTIONS
The trustees of Trust Y and Trust Z believe that it is in the best interests of Y and Z to extend the date of dissolution of the Trusts.
The trustees of Trust Y and Trust Z need further time XXXXXXXXXX in order to provide more flexibility in arranging a distribution of the assets. They feel that XXXXXXXXXX more years will provide a reasonable time period.
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transaction and provided that the underlying agreements are consistent with the above, our rulings are as follows:
A.The proposed variation to each of the Trusts will not be considered to be a "disposition" of property by the Trusts within the meaning thereof in section 54 of the Act.
B.The proposed variation to Trust Y will not be considered to be a disposition of Y's income or capital interest in Trust Y such that subsections 106(2) and 107(1) of the Act will not be applicable to Y as a result of the amendment to Trust Y.
C.The proposed variation to Trust Z will not be considered to be a disposition of Z's income or capital interest in Trust Z such that subsections 106(2) and 107(1) of the Act will not be applicable to Z as a result of the amendment to Trust Z.
D.For the purposes of paragraph 122(2)(a) of the Act, the proposed variation to each of the Trusts, in and by itself, will not cause either of Trust Y or Trust Z to be treated as if it was established after June 17, 1971.
These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996, and are binding provided that the proposed transactions are completed by XXXXXXXXXX.
The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.
Nothing in this ruling should be construed as implying that Revenue Canada has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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