Article 29B

Administrative Policy

Folio S6-F4-C1, "Testamentary Spouse or Common-law Partner Trusts," 3 February 2022

Application of Art. XXIX B of the Canada-U.S. Treaty for US residents to access s. 70(6) rollover re TCP

1.63 … [F]or the rollover treatment in subsection 70(6) to apply on the transfer or distribution of property to a spouse trust, the taxpayer must be resident in Canada immediately before death. Furthermore, the trust must be resident in Canada immediately after the time the property vests in the trust. Subsection 70(6) may also apply on the death of a taxpayer resident in the United States. This is because paragraph 5 of Article XXIX B of the Canada‑US Treaty (the Treaty), deems the taxpayer to have been resident in Canada immediately before the taxpayer’s death. This would be relevant where the deceased individual held taxable Canadian property that was not otherwise exempt under the Treaty at the time of death.

1.64 Where a trust does not meet the requirements of subsection 70(6) because it does not reside in Canada, paragraph 5 of Article XXIX B of the Treaty allows the trust to submit a request to the Canadian Competent Authority. Upon receiving the request, the Canadian Competent Authority may enter into an agreement with the trust that the trust will be treated as being resident in Canada for the purposes of the Act for an agreed period of time and with respect to certain property.

Articles

Elie Roth, Tim Youdan, Chris Anderson, Kim Brown, "Taxation of Trusts Resident in Canada", Chapter 3 of Canadian Taxation of Trusts, (Canadian Tax Foundation), 2016.

Treaty relief from residency requirement in 70(6) – but “will” requirement (p. 171)

Subsection 70(6) applies to a transfer to a taxpayers spouse only when the taxpayer and the spouse were resident in Canada immediately before the taxpayer's death. If the property is to be transferred or distributed to a spousal trust created under the taxpayers will, subsection 70(6) requires that the taxpayer be resident in Canada immediately before death, and the trust must be resident in Canada immediately after the property vests in the trust. Article XXIX B(5) of the Canada-US tax treaty provides some relief from this requirement for individuals who are residents of the United States immediately before death. It deems a US resident individual and her spouse to be residents of Canada for the purposes of subsection 70(6). In addition, a spousal trust with US-resident trustees that would otherwise qualify for rollover treatment under subsection 70(6) may apply for competent authority relief so that it is deemed to be resident in Canada for the purposes of subsection 70(6). Article XXIX B(5) still requires that the transfer of property to the spousal trust be made under a will. This can raise practical difficulties because US individuals often use an inter vivos trust to reduce or defer US estate tax. A transfer made under the terms of such a trust does not qualify for competent authority relief under article XXIX B(5) because the transfer is not made under a deceased person's will. [F.n. 161…2009-094591117]

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(3) 374
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(4) - Paragraph 251.1(4)(d) 437
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(g) - Subparagraph 251.1(1)(g)(ii) 115
Tax Topics - Income Tax Act - Section 164 - Subsection 164(6) 141
Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2) 331
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(1) 144
Tax Topics - Income Tax Act - Section 251.2 - Subsection 251.2(3) - Paragraph 251.2(3)(b) 112
Tax Topics - Income Tax Act - Section 252.2 - Subsection 252.2(2) 115
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(i) 176
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) - Paragraph 70(6)(d.1) 161
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) 1201
Tax Topics - Income Tax Act - Section 248 - (2)-(41) 157
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) 199
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(4) - Paragraph 104(4)(a.2) 59
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(4) - Paragraph 104(4)(a.3) 38
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(6) 174
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(6) 164
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(24) 163
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1) 91
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(18) 49
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(7.01) 66
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) 311
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13) 125
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) 144
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(2) 379

Stillabower, Strain, "U.S Estate Planning for Canadian with U.S. Real Property: Life after the Protocol", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 239.

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