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.
MINISTER/DM'S OFFICE Y.S. 93-1230T ADM'S OFFICE CENTRAL RECORDS RETURN TO RULINGS, ROOM 303, MET. BLDG.
XXXXXXXXXX
Dear XXXXXXXXXX
I am replying to your letter of February 22, 1993, concerning the taxation of interest received on funds held in trust to provide funeral services. I apologize for the delay in replying.
The Department's administrative practice had been to permit the reporting of all interest accumulated on prepaid funeral arrangements either by the contributor at the time of withdrawal upon cancellation of the contract, or by the funeral director at the time the monies were applied against the cost of the services provided by the funeral home.
This administrative practice was developed before 1976 when few provinces had specific legislation in place concerning these arrangements. Since then, legislation has been implemented by most of the provinces whereby the funds are held in trust on behalf of the individual contributor until they are applied to pay funeral expenses or the arrangement is cancelled.
The Department's interpretation of the income tax law as it applies to the present provincial regimes is that contributors are required to report the interest earned annually. On May 1, 1992, we advised funeral service associations across the country of our position and indicated that Interpretation Bulletin IT-246 would be revised accordingly for 1992.
In subsequent meetings with representatives of The Funeral Service Association of Canada, the Department agreed to delay until 1993 the implementation of the changes set out in our letter of May 1, 1992. This delay was to allow time to solve the administrative difficulties faced by trustees in implementing a reporting system.
The Funeral Service Association of Canada has agreed to assist the Department with the revision of our Bulletin to reflect the best interpretation of the law and to establish reporting guidelines for the interest earned. This work is scheduled to be completed by September 1993.
The present law governing taxation of trusts and contributors to trusts is quite clear and deviations for a particular class of trusts would require a change to the Income Tax Act. Consideration of such changes is the responsibility of my colleague, the Honourable Don Mazankowski, Minister of Finance. Accordingly, I have provided Mr. Mazankowski with a copy of this reply.
The Funeral Service Association of Canada has provided the Department with figures indicating that there is approximately a billion dollars held in trust for prepaid funeral services.
I appreciate your interest in this matter and hope that my comments will be of assistance.
Yours sincerely,
Otto Jelinek
c.c. The Honourable Don Mazankowski, P.C., M.P. Minister of Finance
April 28, 1993
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