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: An individual ( a mother) has 5 separate accounts with a stockbroker. For estate planning purposes, the individual has registered each of her five children with respect to right of survival (i.e., each child is registered with respect to one account). For income tax purposes, the individual currently considers herself to be the owner of property in respect of the accounts. As there are large variances in the fair market value of each account, the individual would like to consolidate the five accounts into one account with all five of her children named on the account with right of survival. Would the consolidation result in a disposition?
Position: This issue involves a question of fact. However, it is our general that a disposition would not occur.
Reasons: As a result of the term "right of survivor" (this term is understood to refer to the right of a survivor to certain property of a person following the death of that person), it is our general view that a disposition would not occur.
XXXXXXXXXX 1999-000535
M. Eisner
November 16, 1999
Dear XXXXXXXXXX:
Re: Consolidation of Investments Accounts
This is in reply to your letter of September 23, 1999, concerning the above-noted subject.
In the situation that you have outlined, Mrs. S has five separate investment accounts with a stockbroker. For estate planning purposes, Mrs. S registered each account with the name of one of her five children with respect to right of survival (i.e., each child is registered with respect to one account). It was her original intent that each account with the stock broker would have similar transactions. However, over the years, each account has had a variety of transactions resulting in large variances as to the fair market value of each account. For income tax purposes, Mrs. S treats each account as her own and reports the related interest income, dividend income, and capital gains in her tax return. Mrs. S would now like to consolidate each of these accounts into one account with all five of her children named on the account with right of survival.
As the broker has to treat the securities in each of the five accounts as a sale and a reacquisition with respect to the new consolidated account, you have asked us to confirm that the consolidation of the five accounts into one account will not result in a disposition.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. While it is necessary to review all the relevant facts and documentation in order to determine whether an individual is the owner of property and whether a change in ownership has occurred, we are providing you with the following general comments that are not binding on the Department.
On the basis that Mrs. S is the legal and beneficial owner and will continue to be the legal and beneficial owner of the securities and the funds on deposit following the consolidation, it is our general view that the fact that the five accounts become consolidated will not give rise to a "disposition" pursuant to the definition of this term in section 54 of the Income Tax Act (the "Act") with the result that there would be no capital gain or loss as a result of the consolidation. However, with respect to the investment assets that are capital property owned by Mrs. S at the time of her death, the provisions of paragraph 70(5)(a) of the Act will apply. She will be deemed to have disposed of all such property immediately before her death for proceeds equal to the fair market value thereof. In accordance with paragraph 70(5)(b) of the Act, the individuals acquiring the property on her death pursuant to the right of survival will be deemed to have acquired that property at its fair market value.
We trust that these comments will be of assistance.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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