News of Note
CRA confirms that indefeasible vesting requires inter alia ascertainment but not conveyance
Email this ContentThe will of the taxpayer provided for the residue of the estate to be held for the surviving spouse, as a spousal trust.
CRA indicated that in order for s. 70(6) to apply, the capital property of the deceased must be "transferred or distributed" as a consequence of the death (e.g., per s. 248(8), under the will), to the spousal trust within 36 months of the death, subject to extension. In this regard, Boger Estate established that a formal conveyance is not necessary to transfer or distribute the property in question, so that the absence of such a conveyance of the residue to the testamentary spousal trust would not preclude this requirement from being satisfied.
Regarding the general requirement in s. 70(6) that the property of the deceased vest indefeasibly in the spousal trust within 36 months of the death, CRA indicated that property can vest indefeasibly in a beneficiary even if the title has not yet been transferred by a legal conveyance - for example, where there is a specific, non-contingent, and uncontested bequest to a surviving spouse and it is clear that the estate has sufficient assets to allow its distribution. Regarding the residue of an estate, generally, only once it is clarified and the beneficiaries have an enforceable right to the property can those assets vest in the beneficiaries.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.7 under s. 70(6).
CRA indicates that a s. 116 certificate can cover multiple estate distributions to a non-resident beneficiary
CRA indicated that where the executor or trustee of an estate or trust will be making several capital distributions to a non-resident beneficiary (whose capital interest in the trust or estate constitutes taxable Canadian property) over multiple years, the beneficiary can apply now for a s. 116 certificate (along with payment of the tax to cover the gain on the disposition of the capital interest - or the provision of security therefor). After verification, CRA will issue a certificate of compliance. The certificate limit is based on the estimated total distributions, so that the capital distributions over time can be received by the beneficiary up to the certificate limit.
If the facts change, another T2062 application can be made with an additional payment or security to cover any increase in the tax payable. Upon review, the CRA will then issue a revised certificate.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.6 under s. 116(2).
Our translations of CRA interpretations go back 25 years
We have translated a CRA interpretation released last week and a further 6 CRA interpretations released in July and June of 2000. Their descriptors and links appear below.
These are additions to our set of 3,234 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 25 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
St-Joseph – Quebec Court of Appeal finds that the transformation of 2 floors of commercial building to residential use did not qualify as a “termination” of commercial activity for QST purposes
St-Joseph incurred costs in converting the 1st and 2nd floors of a 12-storey mixed-use tower from commercial rental use into rental seniors’ residences (RSRs). It argued based on the QSTA equivalent of ETA s. 141.1(3)(a) that it had incurred the costs “in connection with the … termination of a commercial activity” of it, so that such costs were deemed to have been incurred in the course of its commercial activity, thereby entitling it to input tax refunds under the Quebec equivalent of ETA s. 169(1) – B(c).
In rejecting this position and before dismissing St-Joseph’s appeal, the Court stated:
[Its] argument … fails to explain how the transformation aimed at a new activity is, in itself, related to the termination of the previous activity.
… [T]he expenses for the renovation and transformation into an RSR were not related to the termination of the commercial rental activity … .
Neal Armstrong. Summary of St-Joseph Immobilier inc. v. Agence du revenu du Québec, 2025 QCCA 745 under ETA s. 141.1(3)(a).
CRA finds that a vendor’s disclosing on its invoices the amount of meal allowances paid to its sales people transferred the 50% s. 67.1 denial onto the purchasers
S. 67.1(1) generally grinds the deduction for amounts payable in respect of the human consumption of food or beverages by 50% thereof. However s. 67.1(2)(c) provides an exception for:
“an amount for which the person is compensated and the amount of the compensation is reasonable and specifically identified in writing to the person paying the compensation”.
The taxpayer, which sold goods for a fixed price payable in instalments, paid reasonable meal allowances to its employees for their travel in connection with the sales (e.g., installations). These allowances were not disclosed to the purchasers except that the interim invoices for the instalments contained a note, for information purposes only, setting out the cumulative amount of the meal allowances paid to date.
Before concluding that (by virtue of the exception in s. 67.1(2)(c)) s. 67.1(1) did not limit the deduction to the taxpayer for its incurring of the meal allowances and that such 50% denial instead applied to the purchasers respecting the cumulative amount of the meal allowances referred to in the interim invoice note, CRA indicated:
- The interim billing payments of the purchasers were intended to pay or reimburse the taxpayer for the costs incurred in performing the contract, including related reasonable meal allowances; and it was unnecessary to specify their amount in the contracts or for them to be billed separately.
- A note on an invoice allowing a purchaser to determine the amount for food or beverages that was included in the total amount invoiced was sufficient to satisfy the “specifically identified in writing” requirement of s. 67.1(2)(c).
- In light of the broad interpretation of “in respect of”, the cumulative amount of reasonable meal allowances paid or payable to date referred to in such interim invoices note disclosure was “an amount paid or payable in respect of the human consumption of food or beverages” for the purposes of the application of s. 67.1(1) to the purchasers.
Will purchase agreements start prohibiting the vendor from making any disclosure of any meal allowances incurred by it?
Neal Armstrong. Summary of 21 February 2025 Internal T.I. 2021-0902871I7 F under s. 67.1(2)(c).
CRA refers to some guidelines applied by it in considering financial-hardship requests for excess withdrawals from a PGAP RDSP
For a registered disability savings plan (“RDSP”) that is a primarily government assisted plan (a “PGAP”), i.e., government contributions exceed plan holder contributions, annual withdrawals are limited to 10% of the value in the RDSP at the beginning of the year – except that CRA has indicated that it may permit withdrawal requests above that limit in circumstances of financial hardship where it is just and equitable to do so.
CRA referred to three of its financial-hardship guidelines in this regard:
- Whether the RDSP beneficiary would suffer significant hardship, loss or disadvantage from a refused waiver, e.g., failure to meet the basic necessities of life, or harm to health.
- Whether the granting of the waiver would negatively impact the financial viability of the trust, e.g., referencing impact on family members or caregivers who rely on the trust’s integrity for planning and support.
- Whether the granting of the waiver is consistent with the legislative intent; for example, the RDSP program is not intended to help anyone other than the beneficiary.
CRA indicated that it also has a general guideline that the plan holder must also be the plan beneficiary, given that most waiver requests received, where the holder and beneficiary are not the same individual, are clearly requests to help plan holders who are having financial hardship issues themselves, and not the RDSP beneficiary. However, where the holder and the beneficiary are not the same individual, and the RDSP issuer nonetheless is of the view that the beneficiary is experiencing financial hardship and that a waiver is in the beneficiary's best interests, the issuer is welcome to send a waiver request to CRA explaining why the request warrants an exception to this guideline.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.5 under s. 146.4(4)(j).
CRA indicates that being the beneficiary of a QDT trust would not preclude an individual from making a preferred beneficiary election with a “regular” trust
A resident individual, eligible for the disability tax credit, and the beneficiary of a qualified disability trust (“QDT”) as defined in s. 122(3), also is a beneficiary of a “regular” trust that is not a QDT.
After noting that the individual could qualify as a “preferred beneficiary” if eligible to claim the disability tax credit, among other requirements, CRA indicated that individual being a beneficiary of the QDT would not preclude the regular trust and the individual from making a preferred beneficiary election (assuming the usual conditions were satisfied.)
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.4 under s. 104(14).
CRA describes how a bare trust that was not required to file in its terminal year can communicate its “closed” status
A bare trust filed a T3 return (including Sched. 15) for its 2023 tax year prior to the CRA announcements that bare trust returns were not required for the 2023 – then the 2024 - tax year. The bare trust ceased to exist in 2024 so that it will never file a final T3 return. How can it communicate so that it is no longer considered a required filer?
CRA indicated that the trustee may:
(i) send a letter to the trust tax centre indicating that the bare trust has ceased to exist, and providing the account name and number, and the date of trust termination; or
(ii) file a final T3 return for the 2024 tax year with the date on which the bare trust ceased to exist.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.3 under s. 150(1.2).
CRA indicates that the parents referred to in the ss. 84.1(2.31)/(2.32) rules can be trustees of a trust holding the purchaser corporation or contingent residuary beneficiaries of such trust
Can shares (which do not amount to control) of the purchaser corporation referred to in s. 84.1(2.31) or (2.32) be held by a trust where:
- the parent is a contingent beneficiary in the event of death of a child or all members of the child group, or
- the parent and the parent’s spouse or common-law partner are sole trustees or a majority of the trustees.
CRA noted that the context of this question was the rules in ss. 84.1(2.31)/(2.32)(d) and (e) which provide that the parents, from the time of the disposition of the subject shares, cannot own, directly or indirectly, 50% or more of the shares of any class of the purchaser corporation or the subject corporation other than certain non-voting preferred shares and that, within 36 months of the disposition, must have ceased owning, directly or indirectly, any shares of the purchaser corporation or the subject corporation other than those certain non-voting preferred shares.[
Turning then to the look-through rule in s. 84.1(2.3)(c)(ii) as to the meaning of “own, directly or indirectly,” CRA indicated that it would not consider a person to have an interest in a trust if that person's interest depended solely on the occurrence of an uncertain event, such as a child predeceasing a parent so that, during the lifetime of such child or relevant members of the child group, the parent with such contingent interest would not be considered to own any shares of the purchaser corporation held by the trust.
Regarding the parents as trustees, CRA indicated that it would not consider them in such capacity to own shares of the purchaser corporation for purposes of the share ownership limitations in s. 84.1(2.31)(d) and (e), and in ss. 84.1(2.32)(d) to (f). It would apply the look-through rule in s. 84.1(2.3)(c)(ii) and, if applicable, the deeming rule in respect of discretionary interests in s. 84.1(2.3)(d), to determine who owned directly or indirectly any property held by the trust.
Neal Armstrong. Summaries of 17 June 2025 STEP Roundtable, Q.2 under s. 84.1(2.3)(c)(ii) and s. 84.1(2.31)(d).
CRA indicates that the children receiving an intergenerational transfer may control the purchaser corporation indirectly or as trustees of a trust
Our 2025 STEP Roundtable page - which provides the questions posed, and summaries of the preliminary oral responses given, at the 2025 STEP CRA Roundtable held on Tuesday – is now available.
Q.1 concerned the requirement in the intergenerational transfer rules in ss. 84.1(2.31) and (2.32) regarding continued control by the child group of the purchaser corporation. CRA indicated that the child group may own the purchaser corporation through one or more holding companies owned by them, noting that it was not required that they own shares directly in the purchaser corporation and that the concept of control included indirect control.
Regarding whether shares of the purchaser corporation could be held in a trust under which the only beneficiaries were members of the child group, CRA noted that the focus should instead be on who the trustees of the trust were, as it was the trustees who would control the purchaser corporation. In this regard, CRA noted its position that, in the absence of evidence to the contrary, it considered there to be a presumption that all the trustees would constitute a group, so that generally all such trustees would need to be members of the child group.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.1 under s. 84.1(2.31)(b)(ii).