16 November 1989 Income Tax Severed Letter AC32772 - Attribution Rules

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.

19(1)                            3-2772
                                                 F. Francis
                                                 613-957-3496

November 16, 1989

Dear Sirs:

This is in reply to your letter of October 21, 1989 wherein you requested our opinion in respect of the income tax consequences of certain individuals

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We do not generally give opinions in respect of factual transactions. Enclosed, for your information, is a copy of Information Circular 70-6R which sets out the procedures required for requesting an advance income tax ruling. In this regard, you should note that an advance income tax ruling will only be given in respect of specific proposed transactions. We will, however, offer the following general comments.

Under subsection 74.1(1) of the Income Tax Act (the "Act"), any income or loss on property loaned or transferred by an individual to a trust for the benefit of his spouse is deemed to be income or loss of the individual and not the spouse. It should be noted that this attribution rule is not applicable in respect of property transferred to the trust for fair market consideration. However,

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Furthermore, pursuant to subsection 75(2) of the Act, if any property transferred to the trust is held on condition that it may revert to the person from whom it was received, any income or loss from that property is deemed to be income or loss of the transferor. The transfer of property by a beneficiary to the trust may result in the application of subsection 75(2) of the Act with result that the income or loss from the transferred property would be considered income or loss of the particular beneficiary.

Finally, we note that property transferred to the trust for the benefit of related persons who are over 11 years of age would generally not result in the application of the attribution rules.

We trust the above comments will be of assistance to you.

Your deposit will be refunded under separate cover.

Yours truly, for Director Financial Industries Division Rulings Directorate