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:
Whether subsection 104(13.1) permits different amounts to be designated for each beneficiary.
Position:
Yes, but only to the maximum amount determined by formula.
Reasons:
The formula in subsection 104(13.1) provides a maximum amount that may be designated for each beneficiary. Thus, while an amount up to the maximum may be designated for a beneficiary, it is not practical to designate different amounts.
972921
XXXXXXXXXX T. Murphy
Attention: XXXXXXXXXX
January 15, 1998
Dear Sirs:
Re: Subsections 104(13) and 104(13.1) and paragraph 104(6)(b)of the Income Tax Act (the "Act")
This is in reply to your letter of October 27, 1997, concerning the above noted provisions of the Act. In our opinion, it is not practical to designate different amounts under subsection 104(13.1) to beneficiaries who are entitled to share equally in the income of the trust as the formula in subsection 104(13.1) provides for a maximum designation in respect of each beneficiary and items C, D and E of the formula are based on aggregate amounts. Thus, where the trust has $300 in income, a non-capital loss carry-forward of $100 and three beneficiaries (X, Y and Z) who are each entitled to one-third of the trust's income, the maximum designation under subsection 104(13.1) for each beneficiary on the assumption that the trust deducts $200 under paragraph 104(6)(b) would be:
$100/$300 * ($300 - $200 - $0)
= $33.33
Thus, if you choose to designate $0 to beneficiary X and $25 to beneficiary Y, the maximum amount you can designate to beneficiary Z is still $33.33. Consequently, even though the trust has only deducted $200 under paragraph 104(6)(b) in order to utilize the $100 non-capital loss, the total amount included in the beneficiaries' incomes under subsection 104(13) would be $241.66; $100 for beneficiary X, $75 for beneficiary Y and $66.66 (assuming the maximum designation under subsection 104(13.1)) for beneficiary Z. The $41.66 difference between the subsection 104(13) inclusion and the paragraph 104(6)(b) deduction is comprised of the $33.33 not designated to beneficiary X, and the $8.33 ($33.33 - $25) not designated to beneficiary Y.
We trust our comments will be of assistance to you.
Yours truly,
R.S. Biscaro
Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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