16 June 1999 Ministerial Letter 9912418 - min mail -SETTING UP A 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.

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to respond to your letter addressed to the Honourable Paul Martin, Minister of Finance. Your letter dated January 20, 1999, as well as your two previous letters to him, requested assistance in setting up a trust in order to fund your grandchildren's education. Mr. Martin sent copies of your letters to Mr. Dhaliwal on April 15, 1999.

Revenue Canada's role is to administer the Income Tax Act as passed by Parliament. The Department strives to provide accurate information to enable taxpayers to file returns properly; however, it does not provide tax planning or legal services, nor does it have a specific procedure for you to follow to assist you in setting up a trust. The creation of a trust is a matter of private law. A trust is not created under the Act. As a trust is a complex legal concept, most people seek legal counsel in setting up and documenting a trust.

With respect to the tax consequences of transferring property to a trust, you may wish to note that if you transfer property to a trust for the benefit of your grandchildren, you will be considered to have disposed of the property for proceeds of disposition equal to the fair market value of the property at that time. Consequently, should you transfer any property which has appreciated in value to a trust, you would realize a taxable capital gain on such a disposition. The Department has several publications on the implications of a trust holding property. The following documents are enclosed for your information:

1998 T3 Guide and Trust Return
IT-369R Attribution of Trust Income to Settlor
IT-369R Attribution of Trust Income to Settlor - Special Release
IT-381R3 Trusts-Capital Gains and Losses and the Flow-Through of Taxable Capital Gains to Beneficiaries
IT-406R2 Tax Payable by an Inter Vivos Trust
IT-465R Non-Resident Beneficiaries of Trusts
IT-510 Transfers and Loans of Property made after May 22, 1985 to a Related Minor

In your letter to Mr. Martin dated December 4, 1998, you expressed concern over discussions with a rulings officer who stated that he was not bound by the accuracy of information provided to you over the telephone and that getting it in writing was not possible. I can assure you that the Income Tax Rulings and Interpretations Directorate takes very seriously its responsibility of providing accurate technical information and helpful service to clients who call our telephone enquiry service for expert technical assistance. As conversations often cover issues for which there is no official Revenue Canada interpretation, the rulings officer will generally caution the caller that the responses are his or her personal views and not necessarily the views of Revenue Canada. Consequently, his or her comments cannot be taken as binding on the Department and the rulings officer will often suggest that the caller write to the Directorate or to his or her tax services office so that all of the caller's concerns can be properly addressed in writing. This avoids any misunderstanding of issues discussed over the telephone. However, where, as in your situation, an issue is raised which is outside the scope of the Act and the Department's expertise, an officer may simply state that the Department is unable to respond to the request for assistance.

I appreciate the opportunity to address your concerns.

Yours sincerely,

Bill McCloskey
Assistant Deputy Minister
Policy and Legislation Branch

Enclosures

Lena Holloway (957-2104)
June 16, 1999
991241