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 the three trusts can be viewed as three separate testamentary trusts?
Position: Generally yes where the testator creates a separate trust for each of his children.
Reasons: Consistent with previous opinions. Final determination to be made by the Tax Services Office.
M. Lemire
XXXXXXXXXX (613) 957-4363
5-981298
Attention: XXXXXXXXXX
January 14, 1999
Dear Sirs:
Re: Testamentary Trusts
This is in reply to your letter of May 15, 1998 in which you requested our opinion as to whether the three trusts provided in your letter would be separate testamentary trusts. We apologize for the delay in our response.
The situation presented in your letter appears to represent an actual fact situation and as explained in Information Circular 70-6R3, your enquiry should be directed to your local Tax Services Office. We can however provide you the following general comments.
A testamentary trust in subsection 108(1) of the Income Tax Act (the “Act”) is generally a trust or an estate that arose on and as a consequence of the death of an individual other than a trust created by a person other than the deceased individual or a trust created after November 12, 1981, if any property was contributed to it other than by an individual on his or her death.
Where several trusts have been created, substantially all the property in each of them has been received from a single person and the income from the various trusts accrues ultimately to the same beneficiary or class of beneficiaries, subsection 104(2) of the Act allows the Minister to tax the several trusts as if they were a single taxpayer.
Generally, it is our opinion that subsection 104(2) of the Act would not apply in a situation where a testator creates a separate trust for each of his children. However, the applicability of subsection 104(2) of the Act will depend upon the facts of each particular situation. Pursuant to subsection 900(2) of the Income Tax Regulations, the authority of the Minister to make a designation under 104(2) of the Act is the responsibility of the Director of Tax Services of the relevant Tax Services Office. As such, each designation will be very fact specific. While not taken as comprehensive, some of the factors which would be considered in this determination include:
- whether or not there was a clear intent by the testator, as evidenced by the terms of the will, to create separate trusts;
- whether or not the trusts had common beneficiaries;
- whether or not the assets of each trust were segregated and accounted for separately (e.g. separate bank accounts, no undivided interests in property, separate accounting records for income received and capital and/or income disbursements); and
- the conduct and powers of the trustees.
If it is determined that three separate trusts are created under the terms of the will in the scenario provided in your letter, it would generally be our view that they would meet the definition of testamentary trust in subsection 108(1) of the Act. As such, three separate trust income tax returns (T3 returns) would have to be filed without reference to the income or assets of the other trusts.
Our comments are provided in accordance with paragraph 22 of Information Circular 70-6R3 dated December 30, 1996.
We trust our comments will be of assistance to you.
Yours truly,
T. Murphy
Manager
Trusts Section
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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