1999 Ruling 9910813 - PROTECTIVE TRUST

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:

1. Whether the definition of "disposition" in proposed subsection 248(1) applies on a transfer of property to a trust.

2. Whether the transfer of property to a trust is a qualifying disposition for the purposes of proposed subsection 107.4(1) and, consequently whether the provisions of proposed subsection 107.4(3) applies.

Position:

1. Yes.

2. Yes.

Reasons:

Analysis of the legislative proposals on trusts issued on December 23, 1998.

XXXXXXXXXX
XXXXXXXXXX 1-991081
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs\Madams:

Re: Advance Income Tax Ruling
XXXXXXXXXX
XXXXXXXXXX

We are writing in response to your letter dated XXXXXXXXXX concerning the advance income tax ruling (our file 3-980653) dated XXXXXXXXXX, 1998 (the "Ruling") issued to yourselves on behalf of the above-referenced taxpayers. More particularly, your letter concerns an amendment proposed to be made to the meaning of the term "Property" at the beginning of the aforementioned Ruling.

As noted in the Ruling, the Property means the assets of XXXXXXXXXX located in XXXXXXXXXX consisting of XXXXXXXXXX. It is proposed to amend that definition so that the assets of XXXXXXXXXX will consist of XXXXXXXXXX and this change will be reflected in the Deed at clause 1(a)(ix).

We confirm that this change in the meaning of Property will not invalidate or otherwise affect the rulings previously issued.

Furthermore, in your letter, you have requested our comments with respect to the legislative proposals on trusts which were released by the Department of Finance on December 23, 1998.

COMMENTS

Provided that our understanding of the facts and proposed transactions described in the Ruling letter and herein is correct and provided that the legislative proposals on trusts are enacted in substantially the same form, we are prepared to provide the following comments. It is our view that:

- the transfer of the Property by the Settlor to the Trust as described in paragraph 3 of the Ruling will be a disposition of Property for the purposes of the proposed definition of "disposition" in subsection 248(1).

- provided that there will be no variation of the Trust to add another beneficiary or to modify in any matter or form whatsoever the interest of the Settlor as the beneficiary of the Trust, the transfer of the Property by the Settlor to the Trust as described in paragraph 3 of the Ruling will constitute a "qualifying disposition" for the purposes of proposed subsection 107.4(1).

- the provisions of proposed subsection 107.4(3) will apply.

The above comments are not rulings and therefore 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

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