19 June 1990 Income Tax Severed Letter 900465 F - Roll-over of Farm Property to Children - Vesting Indefeasibly

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.

Attention: 19(1)

June 19, 1990

Dear Sir:

Re:  Vesting indefeasibly

This is in reply to your letter of March 5, 1990 requesting our confirmation that the principle used in the Peardon case (86 DTC 1045) should apply to allow your client to rollover farm property to his children under the provisions of subsection 70(9) of the Income Tax Act.  We apologize for the delay in our response.

In accordance with the comments in paragraph 23 of Information Circular 70-6R written opinions on proposed transactions are not given.  We do, however, provide the following comments.

Our Comments:

a)     In our view the Peardon case was determined on the facts of that case, which was in any case involving a spousal trust. The facts in your example involve a testamentary trust for the children and a life interest, in the house only, for the spouse.

b)     The Department's views on the meaning of the term "vested indefeasibly" are contained in Interpretation Bulletin IT-449R.

We refer you in particular to paragraph 1 where it suggests that in circumstances similar to your proposed transaction that the property may not be considered to vest indefeasibly where another person has immediate or future benefit from the property.  On the other hand paragraph 8 or IT-449R contains a number of examples which describe some circumstance in which property is considered to vest indefeasibly.  You may wish to consider one of these examples as an alternative to the proposed actions to your client.

We trust our comments will prove helpful.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch