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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Whether the proposed modification of the trust deed will result in a resettlement of the mutual fund trust, and thereby result in a disposition by the trust of its property and/or a disposition by the unitholders of their trust units.
Position:
No.
Reasons:
The modification is very minor and is in accordance with the terms of the Amended Trust Deed. The ownership interests of the unitholders are unchanged.
XXXXXXXXXX 2003-003591
XXXXXXXXXX, 2003
Dear XXXXXXXXXX:
Re: XXXXXXXXXX ("Fund")
Advance Income Tax Ruling
This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the Fund. We acknowledge your subsequent correspondence of XXXXXXXXXX.
To the best of your knowledge and that of the Fund, none of the issues involved in this rulings request is:
(a) in an earlier return of the Fund or a related person;
(b) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the Fund or a related person;
(c) under objection by the Fund or a related person;
(d) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or
(e) the subject of a ruling previously issued by the Directorate.
Our understanding of the facts, the proposed transactions and the purpose of the proposed transactions is as follows:
Facts
1. The business number of the Fund is XXXXXXXXXX. Its address is
XXXXXXXXXX.
2. The Fund is a mutual fund trust as defined in subsection 132(6) of the Income Tax Act (the "Act"). The trustee of the Fund is XXXXXXXXXX (the "Trustee"). The manager of the Fund is XXXXXXXXXX (the "Manager"). Units of the Fund are offered to the public (the "Unitholders").
3. The Fund was settled in XXXXXXXXXX by XXXXXXXXXX, a proprietorship and predecessor of the Manager, to facilitate the investments of moneys on behalf of numerous persons who wish to consolidate certain of their investments under the management and direction of the Manager. The Fund was governed by a Trust Deed.
4. Effective XXXXXXXXXX assigned its rights under the Trust Deed to the Manager.
5. XXXXXXXXXX was the trustee of the Fund until XXXXXXXXXX when it resigned. At that time the Trustee agreed to accept the appointment as trustee of the Fund upon certain amendments being made to the Trust Deed, with the result the Amended and Restated Trust Deed ("Amended Trust Deed") reads as per the copy you provided.
6. Article XXXXXXXXXX of the Amended Trust Deed deals with the creation of funds and permits the creation of funds in addition to the initial Fund. No additional funds have been created to date.
7. Article XXXXXXXXXX of the Amended Trust Deed deals with the register and transfer of Units. Section XXXXXXXXXX states that Units of each Fund are not transferable, except as provided for in Sections XXXXXXXXXX, which are summarized as follows:
(a) Section XXXXXXXXXX permits the transfer of Units to any person becoming entitled to said Units as a consequence of the death, incapacity, bankruptcy or insolvency of any Unitholder or otherwise by operation of law;
(b) Section XXXXXXXXXX permits a transfer between plans that are registered plans permitted under the Income Tax Act (Canada) that are established for the benefit of the same Unitholder or the Unitholder's spouse;
(c) Section XXXXXXXXXX permits the transfer of Units to a transferee, pledgee, mortgagee or other encumbrancer for the purpose of granting or realizing on collateral or a security interest in a Unit in connection with a loan made to a Unitholder subject to certain conditions.
8. Section XXXXXXXXXX of the Amended Trust Deed provides that the Trustee may, with consent of the Manager, modify the terms of the Amended Trust Deed if it considers such amendment advisable for the purpose of overcoming difficulties which have been or may be encountered in the administration of the Fund.
Proposed Transactions
9. The Manager and the Trustee will enter into an agreement (the "Agreement") to amend Article XXXXXXXXXX of the Amended Trust Deed. A draft of the Agreement was provided by you.
10. Under Clause XXXXXXXXXX of the Agreement, Sections XXXXXXXXXX of the Amended Trust Deed will be deleted and replaced with Sections XXXXXXXXXX that will read as follows:
XXXXXXXXXX No Transfer of Units. Units of each Fund are not transferable, except as provided for in Section XXXXXXXXXX hereof;
XXXXXXXXXX Permitted Transfers. Notwithstanding Section XXXXXXXXXX , upon the production of such agreements, instruments, certificates, opinions, documents or other records as the Trustee and the Manager may reasonably require and, with the written consent of the Manager, Units may be transferred:
(a) to any person becoming entitled to any Units as a consequence of the death, incapacity, bankruptcy or insolvency of any Unitholder or otherwise by operation of law, provided that until any such transfer is recorded on the Register maintained by the Trustee, the Unitholder shall be deemed for all purposes to be the holder of the Units registered in its name and neither the Trustee nor the Manager shall be bound by or affected by any notice of such death, incapacity, bankruptcy or insolvency;
(b) between such plan or plans registered under the Income Tax Act (Canada) as may be established by or for the benefit of the same Unitholder or their spouse;
(c) to a transferee, pledgee, mortgagee or other encumbrancer for the purpose of granting or realizing on collateral or a security interest in such Units in connection with a loan made to a Unitholder, provided that such transferee, pledgee, mortgagee or other encumbrancer provides the Trustee such evidence as the Trustee may request to evidence such security interest or the right to realize upon such Units; or
(d) to any other person, with the consent of the Trustee.
11. Under Clause XXXXXXXXXX of the Agreement, Section XXXXXXXXXX of the Amended Trust Deed will be amended to replace "Section XXXXXXXXXX" with "Section XXXXXXXXXX".
Purpose of the Proposed Transactions
12. The purpose of the proposed transaction described in 10 above is to provide the Trustee with greater authority than it now has to approve the transfer of Units of the Fund by Unitholders.
13. The purpose of the proposed transaction described in 11 above is to correct a drafting error.
Rulings
Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, the proposed transactions and the purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:
A. The amendments to the Amended Trust Deed set out in Clause XXXXXXXXXX of the Agreement will not, in and by themselves, result in a resettlement of the Fund, a disposition of the property of the Fund or a disposition of the issued and outstanding Units, or any part of the Units, of the Fund for the purposes of the Act.
B. As a result of the proposed transactions, in and by themselves, subsection 245(2) of the Act will not be applied to redetermine the tax consequences confirmed in Ruling A.
These rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002, and are binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed before XXXXXXXXXX.
The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act.
Nothing in this ruling should be construed as implying that the Canada Customs and Revenue Agency has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those described in the rulings given.
Yours truly,
XXXXXXXXXX
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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