1 December 1989 Ministerial Letter 58998 F - Testamentary Trust Designation - Meaning of "Amounts Deemed Not Paid"

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.

December 1, 1989

Dear Sirs:

Re:  "Amounts Deemed Not Paid" Subsections 104(6), 104(13.1) and 104(13.2) of the Income Tax Act (the "Act")

This is in reply to your letter of November 1, 1989 concerning the abovementioned subject.

Your question is whether, if tax became payable pursuant to a testamentary trust by reason of the designation "amounts deemed not paid", and should the tax be recovered from the trust income beneficiary who benefited from the designation, would that recovery constitute a "contribution" to the trust which would affect its status as a testamentary trust as defined in paragraph 108(1)(i) of the Act.

It is our opinion that a beneficiary in respect of whom a designation is made under subsection 104(13.1) or 104(13.2) of the Act subsequently reimburses the trust capital for any taxes paid by the trust, the trust would lose its status as a testamentary trust as defined in paragraph 108(1)(i) of the Act.

The effect of subparagraphs 108(1)(i)(ii) and (iii) of the Act is that if someone other than the testator contributes property to a testamentary trust, that trust will no longer qualify as a testamentary trust.  It will become an inter vivos trust as defined in paragraph 108(1)(f) of the Act.

We trust the above comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate