4 February 1997 External T.I. 9635545 - ATTRIBUTION RULES AND SPOUSES

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:

Whether or not attribution rules apply when a taxpayer pays to a spouse a sum of money for a right the spouse has, upon the marriage breakup, in the family assets of the taxpayer pursuant to section 43 of the Family Relations Act of British Columbia.

Position:

The attribution rules apply.

Reasons:

It is likely that the fair market value of the money received by the spouse will exceed the fair market value of the right given up. In essence, it is simply a transfer of property in the form of cash. To regard it otherwise would nullify the attribution rules.

	                              	963554
XXXXXXXXXX	                             Jacques E. Grisé
                                       (613)957-2059

Attention: XXXXXXXXXX

February 4, 1997

Dear Sirs:

Re: Attribution Rules and Spouses

This is in reply to your letters of October 21, 1996 and January 9, 1997 requesting our technical interpretation on the issues described in your October letter.

You describe a situation where two resident of Canada individuals, married to each other, enter into a marriage agreement. Under the terms of the agreement, the taxpayer will pay a sum of money to the taxpayer's spouse as consideration for the spouse agreeing to waive any entitlement the spouse has under Part 3 of the Family Relations Act of British Columbia. You are concerned whether or not the income on the sum of money or property substituted therefor will attribute to the taxpayer pursuant to subsection 74.1(1) of the Income Tax Act.

In our view, subsection 74.5(1) of the Income Tax Act would not apply to deny the application of subsection 74.1(1) of the Act in the situation described in your October letter and as a result, the income on the sum of money or property substituted therefor would attribute to the taxpayer.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch