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 payments made to Inuit elders by a trust are taxable?
Position: There will be no net income inclusion unless the elders receive trust income.
Reasons: Trust income would be included in income under 104(13)(a).
Lucie Vallières
Income Security Programs
Human Resources Development Canada 2000-001253
Program Delivery Services Karen Power, CA
355 River Road, Tower B, 9th Floor
Vanier ON K1A 0L1
March 28, 2000
Dear Ms. Vallières:
Re: Nunavut Elders Benefit Plan
We are writing in reply to your correspondence of March 1, 2000 and March 7, 2000, wherein you requested our comments on whether the position stated in our interpretation letter 5-933000, is still valid in light of Nunavut becoming a separate territory.
Our understanding of the situation is as follows (some information was obtained from the Internet and the March 16, 1995 letter from the Nunavut Trust):
- The Nunavut Elders' Benefit Plan (the "Plan") was established in October, 1994 for Elders 55 years of age and older. Any Inuit born in 1948 or earlier (50 years or older in 1998) and registered under the Nunavut Land Claim Agreement (the "Agreement") can enter the Plan. The Plan provides an income supplement to improve quality of life. Those who qualify under the Plan receive a regular monthly payment to help cover basic expenses such as food, clothing and a home.
- The Nunavut Elders Pension Trust (the "Trust") was established to make the payments to eligible Elders under the Plan.
- It is our understanding that the Trust receives its funding from the Nunavut Trust, a trust set up for the sole purpose of receiving the land claim settlement money.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.
The Agreement indicates that general tax laws will apply to the recipient of any capital or income from the Nunavut Trust. As we are not aware of any other legislation which would exempt the taxation of payments under the Plan, the Elders are subject to general tax laws.
The taxation of payments made by the Trust to Elders under the Plan will depend on the source from which the payments are made. The source of the payments will depend in part on whether the Trust received income or capital payments from the Nunavut Trust.
If the payments to the Elders are paid solely from the Trust's capital, the payments will not be taxable. If, on the other hand, income is received from the Nunavut Trust or income is derived by the Trust from its capital and such income is used to make the payments, the payments will be fully taxable under paragraph 104(13)(a) of the Act as a distribution by the Trust of its income to a beneficiary. Finally, if the payments made to the Inuit elders represent blended distributions of capital and income of the Trust, the portion of the payment paid out of the income of the Trust will be taxable under paragraph 104(13)(a) of the Act and the balance will be non-taxable.
If the Trust allocates amounts to the Elders which are taxable under paragraph 104(13)(a), the trustees are required to prepare a T3 Summary and the related T3 slips.
As discussed in our earlier letter section 13 of the Old Age Security Act provides that a person's income for purposes of the Guaranteed Income Supplement ("GIS") is to be determined in accordance with the Act. Since paragraph 104(13)(a) of the Act is considered in computing net income for income tax purposes, it follows that it will also be considered in determining a person's entitlement to the GIS. If all they receive is payments from the capital of the Trust, there is no income for purposes of determining GIS entitlement.
Based on the above analysis, it is possible for the Elders to have received non-taxable payments. We would require further information, such as the Trust agreement and the funding arrangement to determine the appropriate tax treatment of payments received by Elders.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
For Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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