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.
950501
XXXXXXXXXX G. Kauppinen
(613) 957-4363
Attention: XXXXXXXXXX
Dear Sirs:
Re: Paragraph 73(1)(c) of the Income Tax Act ("the Act")
This is in reply to your letter dated February 10, 1995 wherein you requested our opinion as to the meaning of the words "entitled to receive" contained in paragraph 73(1)(c) of the Act.
It is our view that the phrase "entitled to receive" all of the income of the trust means to have a legal right to enforce payment of that income. For a spouse to have a legal right to enforce payment of all of the income of the trust, it is our opinion that discretion to receive all or part of the income of the trust must be solely in the hands of the spouse beneficiary. If the spouse beneficiary can legally enforce payment of all income of the trust but indicates in writing to the trustee(s) of the trust a desire not to receive some or all of such income, the fact that some income is retained by the trust and added to the capital of the trust will not, by itself, disqualify the trust as a spousal trust.
If, however, the trustee(s) of a trust may, under the terms of the trust agreement, restrict the payment to the spouse of any portion of the trust's income it is our view that the spouse is not "entitled to receive" all the income of the trust within the meaning of paragraph 73(1)(c) of the Act and the trust will not be a spousal trust.
Our comments above would not change if the taxpayer's spouse were the sole trustee of the trust. However, as stated above, a qualifying spouse trust cannot be discretionary with respect to the entitlement of the spouse, as beneficiary of the trust, to enforce payment of the income of the trust (as defined in subsection 108(3) of the Act). However a qualifying spouse trust could be discretionary with respect to capital encroachments in favour of the spouse during her lifetime.
We trust the foregoing is of assistance. However, as mentioned in paragraph 22 of Information Circular 70-6R2, the above comments constitute an expression of opinion only and are not binding on Revenue Canada.
Yours truly,
for Director
Manufacturing Industries,
Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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© Her Majesty the Queen in Right of Canada, 1995
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