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.
Dear Sirs:
Re: Transfer of Farm Property from Spouse's Trust to Settlor's Children Subsection 70(9.1) of the Income Tax Act (the "Act")
This is in reply to your letter of November 13, 1991 concerning the application of subsection 70(9.1) of the Act in the following hypothetical situation.
* Husband dies in XXX.
* The husband's will provided for a spousal trust, that was resident in Canada. The property immediately vested indefeasibly in the trust. In addition, the terms of the trust provided that:
- a) The spouse was entitled to receive all of the income of the trust, and
- b) No other person except the spouse may, before the spouse's death, receive or otherwise attain the use of any of the income or capital of the trust.
XXX
* It is your view that, "provided a valid election is made under subsection 70(9.1), the land shall be deemed to have been disposed of for proceeds not greater than the fair market value of the land immediately before the death of the spouse and not less than the adjusted cost base of the trust immediately before the death of the spouse."
The fact situation which you set out is quite specific and it appears that it may relate to definite contemplated transactions. Assurance as to the tax consequences of contemplated transactions can only be given in response to a request for an advance income tax ruling. If you wish to obtain any binding commitment with respect to an actual case with facts similar to your example, an advance income tax ruling application should be submitted. If, on the other hand, your situation reflects factual historic occurrences, the determination with respect to the application of subsection 70(9.1) of the Act would generally be carried out by personnel from your local District Taxation Office. We do, however, provide the following comments for your information.
As stated in paragraph 16 of Interpretation Bulletin IT-349R2, it is our view that where a valid election is made under subsection 70(9.1) of the Act the trust may elect the amount of the proceeds of disposition of the land to be any amount that is between the adjusted cost base of the land to the trust immediately before the spouse's death and the fair market value of the land immediately before the death of the spouse. Consequently, where the fair market value is less than the adjusted cost base the elected amount may be more than the fair market value and less than the adjusted cost base.
We trust our comments will be of assistance to you.
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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