3 May 1990 Income Tax Severed Letter AC59847 - Transfer of Personal Property to 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.

5-9847
                                    A.B. Adler
                                    (613) 957-8962

24(1)

Attention: 19(1)

May 3, 1990

Dear Sirs:

This is in reply to your letter dated March 22, 1990 in which you raised certain questions concerning the application of paragraphs 54(c) and (h) of the Income Tax Act (the "Act") where there is a transfer of personal property to a trust.

In your example the transfer of personal property to a trust gives rise to the creation of a lifetime income interest that is payable to a person other than the transferor, and of a residual capital interest to the transferor (or to the transferor's estate).

Our comments follow.

We are not in a position to determine whether the transfer of personal property to a trust results in a disposition of the entire interest thereof or of only the lifetime income interest based upon a hypothetical example. Further, it is always a question of fact whether a transaction is an income or capital transaction, however, generally there would be a disposition under subparagraph 54(c)(iii) of the Act in situations where capital property is transferred to a trust.

Concerning the method to be used in determining the proceeds of disposition of a lifetime income interest we suggest that you write to the Business Equity Valuation group at the Hamilton District Office for their views with respect to this matter since we do not generally offer opinions on methods for the valuation of property.

Should you have an actual case under consideration we suggest that you request a ruling. We would then, presumably, be in a position to respond to your questions 1 and 4.

Yours truly,

for Director Financial Industries Division Rulings Directorate