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:
Result where subsection 75(2) applies to trust described in subsection 94(1).
Position:
Subsection 75(2) is applied first.
Reasons:
This can be inferred from the words of subsections 92(1) and 94(5).
962276
XXXXXXXXXX Olli Laurikainen
(613) 957-2116
Attention: XXXXXXXXXX
December 3, 1997
Dear Sirs:
Re: Non-resident Trusts - Subsections 75(2) and 94(1)
The purpose of this letter is to advise you of the following correction to our technical interpretation letter to you dated January 10, 1996 concerning the above subject matter.
In the January 10, 1996 memorandum we indicated that the rules set out in subsection 94(1) of the Income Tax Act (the "Act") would generally take precedence over the general provisions of subsection 75(2) the Act. Such is not the case. In circumstances where the conditions for the application of both subsection 94(1) and subsection 75(2) of the Act are fulfilled, it is our view that the provisions of subsection 75(2) of the Act will apply first. Our view is supported by the words in brackets in subsection 92(1) and subsection 94(5) of the Act which deal with the computation of the adjusted cost base of shares in a foreign affiliate and a non-resident trust described in 94(1)(d) respectively. From those words it can be inferred that the attribution rules apply to income from property before the foreign accrual property income computation is made with the result that there is no foreign accrual property income where there otherwise would be. The words in brackets in those provisions are required to provide for an adjustment to adjusted cost bases as if there had been foreign accrual property income.
Notwithstanding that the above adjusted cost base computations are not relevant to a trust described in paragraph 94(1)(c) of the Act, it is our view that those provisions demonstrate that the attribution rules override the provisions of subsection 94(1) of the Act including paragraph (c) thereof. As a result, where certain income of a trust described in paragraph 94(1)(c) of the Act is deemed to be income of another person pursuant to subsection 75(2) of the Act, it would not be included in the computation of the income of the trust under subsection 94(1)(c)(i) of the Act. In addition, it is noteworthy that subsection 75(2) of the Act could apply notwithstanding that subsection 94(1) is inapplicable, for example, where the conditions set out in subparagraph 94(1)(b)(i) have not been met.
We apologize for any inconvenience that our previous interpretation may have caused you.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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