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:
variations of trusts - do they cause resettlement
Position:
depends on facts of variation
Reasons:
taxpayer situation appeared to be actual fact situation
952113
XXXXXXXXXX L. Holloway
(613) 957-8953
Attention: XXXXXXXXXX
May 22, 1996
Dear Sirs:
Re: Proposed Distribution from a Pre-72 Spousal Trust
This is in reply to your letter of August 4, 1995, requesting a technical interpretation of the tax consequences of the distribution of property from a pre-72 spousal trust. We apologize for the delay in our response.
The situation presented in your letter appears to represent an actual fact situation and proposed transactions. As explained in Information Circular 70-6R2, it is not the Department's practice to comment on proposed transactions other than in the form of advance income tax rulings. Should your situation involve completed transactions, your enquiry should be directed to your local Tax Services Office. However, we can provide you with the following general comments.
The tax consequences of a disposition of an income interest in a trust are discussed in Interpretation Bulletin IT-385R2. We do not have a publication dealing with the tax consequences of trust variations. Whether a variation would cause a disposition and resettlement of the trust property for income tax purposes or a disposition of a beneficiary's interest in a trust can only be determined upon the review of all the relevant facts surrounding a proposed variation. For a review of the potential tax problems encountered when contemplating a variation we refer you to an article entitled "Variations of Trusts: An Analysis of the Effects of Variations of Trusts Under the Provisions of the Income Tax Act" by Joel T. Cuperfain and William Innes appearing in the Canadian Tax Journal, 1995, Volume 43, Issue Number 1.
Yours truly,
T. Murphy
A/Section Chief
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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