Cases
British Columbia Investment Management Corp. v. Canada (A. G.), 2018 BCCA 47, aff'd 2019 SCC 63
bcIMC was a BC Crown agent which was formed to manage and hold investments for the provincial pension plans. The governing Act created a statutory trust under which each pension plan only has an entitlement to units in the investment pools managed by bcIMC and does not have ownership in any investment pool assets. Willcock JA noted (at para 109) that “there is no clear beneficial interest in the pooled funds that is distinct from bcIMC’s legal interest.”
Before concluding that (but for an intergovernmental agreement under which the Province agreed that it and its agents would be liable for GST), s. 267.1(5)(a) had the effect of imposing federal tax on bcIMC contrary to s. 125 of the Constitution Act, 1867, Willcock JA found (at para. 113) that s. 267.1(5)(a) effected “a change in the identity of the recipient of the services from the trustee, here the exempt Province, to the trust, a third party” and thereby “had the effect of separating the Crown from its assets.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 125 | imposition of GST on investment assets held by a provincial Crown agent would have been prohibited by its governmental immunity but for the reciprocal taxation agreement | 515 |
| Tax Topics - Excise Tax Act - Section 122 | deeming services provided by B.C. Crown agent in managing assets held in trust trenched on B.C. crown immunity | 249 |
| Tax Topics - Excise Tax Act - Section 267.1 - Subsection 267.1(5) - Paragraph 267.1(5)(a) | services of trustees of managing assets held in trust would not be supply in absence of s. 267.1(5)(a) | 170 |
| Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 19 | enforcement of a reciprocal taxation agreement was possible pursuant to the Federal Courts Act | 246 |
Canada v. Sommerer, 2012 DTC 5126, 2012 FCA 207
Before allowing the taxpayer's appeal from an assessment made on the basis that s. 75(2) applied to attribute a capital gain realized by an Austrian private foundation (founded by the taxpayer's Austrian father) to the taxpayer, Sharlow J.A. noted (at para. 38) that she considered it a "doubtful proposition" that the foundation was a trust, even though the taxpayer's counsel had not argued this alternative basis for overturning the assessment.
First, "an Austrian private foundation is a juridical person with the legal capacity to own property in its own right" and thus is similar to a corporation (para. 40). Second, nothing gave the taxpayer "a legal or equitable claim to the corporate property that is different from that of a shareholder...of a corporation" (para. 42).
Furthermore, there was nothing in the constating documents or Austrian law to support the proposition that the foundation was the corporate trustee of a trust, i.e., that its right "to deal with its property is constrained by any legal or equitable obligations analogous to those of a common law trustee" (para. 41).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(5) | 84 | |
| Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) | does not apply to FMV purchases | 236 |
| Tax Topics - Treaties - Income Tax Conventions | treaty applies to economic double taxation | 356 |
| Tax Topics - Treaties - Income Tax Conventions - Article 13 | attributed gain not included | 415 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | s. 75(2) should not be applied to attribute the same gain to 2 taxpayers | 115 |
Fundy Settlement v. Canada, 2012 DTC 5063 [at at 6881], 2012 SCC 14, [2012] 1 S.C.R. 520, aff'g sub nom St. Michael Trust Corp. v. The Queen, 2010 DTC 5189 [at 7361], 2010 FCA 309, aff'g sub nom Garron v. The Queen, 2009 DTC 1568, 2009 TCC 450
A Barbados-resident corporation was the trustee of two trusts. The Court found that the trusts were resident in Canada because that is where the beneficiaries exercised the central management and control of the trust (the Barbados corporation's management role was minor). Regarding s. 104(1), the Court stated (at paras. 12-13):
St. Michael argues that s. 104(1) links the trustee to the trust for all attributes of a trust, including residency. However, ... there is nothing in the context of s. 104(1) that would suggest there be a legal rule requiring that the residence of a trust must be the residence of the trustee.
On the contrary, s. 2(1) is the basic charging provision of the Act, and its reference to a "person" must be read as a reference to the taxpayer whose taxable income is being subjected to income tax. This is the trust, not the trustee. This follows from s. 104(2), which separates the trust from the trustee in respect of trust property.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) | central management and control test for trust residence | 262 |
Antle v. Canada, 2010 DTC 5172 [at at 7304], 2010 FCA 280
A purported Barbados trust that was used in connection with a tax plan to avoid Canadian capital gains tax on the disposition of shares of a corporation was found not to exist at the time of a purported sale of shares by the purported trust given that the settler never intended to lose control of the shares to the Barbados trustee or of the money resulting from their sale, he did not sign the trust deed until after the sale of the shares to the third party, and the shares were not validly transferred to the trust (and, in fact, at the relevant time, they could not be so transferred because they were subject to the security interest of a third party).
In response to an argument that these findings were external to the trust deed and the terms of the trust deed itself indicated a trust, Noël JA stated (at para. 12):
A test that requires one to look at all of the circumstances, and not just the words of the trust deed, is an approach that appears to have been adopted by Canadian courts generally.
In going on to find that the purported trust also was a sham, Noël JA stated (at paras. 19, 20):
The Tax Court judge found as a fact that both the appellant and the trustee knew with absolute certainty that the latter had no discretion or control over the shares. Yet both signed a document saying the opposite. …[T]he Tax Court Judge misconstrued the notion of intentional deception in the context of a sham. …It suffices that parties to a transaction present it as being different from what they know it to be.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Sham | trust deed did not reflect the factual expectatons of the settler and trustee | 223 |
See Also
Goldman v. The Queen, 2021 TCC 13
The taxpayer’s mother, Ms. Goldman, orally told the taxpayer that she was designating the taxpayer (who was also appointed as the executor) as the beneficiary of Ms. Goldman’s RRSP on the explicit understanding that the taxpayer would use the proceeds of the RRSP to pay the expenses of Ms. Goldman’s funeral including the travel costs of her other daughters, and of administering her estate, pay her final bills, and divide any remaining funds among the Appellant and her two sisters. The taxpayer applied the $76,616 in net proceeds from the RRSP (the “RRSP Proceeds”) largely as instructed.
In concluding that the RRSP Proceeds were transferred to the taxpayer in her capacity of trustee of a trust, Graham J found that the three certainties for the creation of a trust: of subject (the RRSP Proceeds); of object (as orally directed by Ms. Goldman); and of intention (as to which he stated, at para. 32 that “[i]n Ontario, there is no requirement that a trust (other than a trust in respect of land) be in writing to be effective” and (at para. 35) that “the obligation that Judith Goldman imposed on the Appellant was more than a moral obligation.”)
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | s. 160(1) did not apply to a transfer to an individual qua trustee of a valid oral trust | 483 |
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(2) | trustee had no liability for application of s. 160(1) to transfer to the trust, absent s. 159(3) | 215 |
| Tax Topics - Income Tax Act - Section 159 - Subsection 159(3) | CRA could have assessed taxpayer qua trustee, for the s. 160(1) liability of her trust arising on its settlement, under s. 159(3) given the distribution of the corpus without a certificate | 193 |
| Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 49 - Subsection 49(1) | “taking note” of a fact pleaded by the taxpayer is not a permitted Crown response | 131 |
Canada (Attorney General) v. British Columbia Investment Management Corp., 2019 SCC 63, [2019] 4 S.C.R. 559
BCI was a BC Crown agent which was formed to manage and hold investments for the provincial pension plans. The governing Act (the “PSPSA”) and Regulation created a statutory trust under which each pension plan only had an entitlement to units in the investment pools managed by BCI and did not have ownership in any investment pool assets. CRA took the view (and ultimately assessed BCI for $40M in uncollected GST on the basis) that ETA s. 267.1(5)(a) deemed the statutory trust to be a person separate from BCI as agent for the provincial Crown, so that the investment services of BCI were supplied to that separate person.
Before going on to find that such assessments would contravene s. 125 of the Constitution Act, 1867 but for the effect of an Intergovernmental Agreement between B.C. and the federal government, Karakatsanis J stated (at paras. 62, 64):
[I]t is not clear whether the PSPPA and the Regulation contain sufficient language to satisfy the three certainties. For example, the statutory framework does not identify a beneficiary for the Portfolio assets. …
Canada interprets the legislature’s use of the words “held in trust” as necessarily requiring the existence of a private law trust relationship. However, a statutory trust is not bound by ordinary trust principles … .[I]t would certainly be open to the Province to bind BCI to a trust relationship in the private law sense. However, such a conclusion requires an evaluation of whether the three certainties are met, not simply a reference to the phrase “held in trust.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Constitution Act, 1867 - Section 125 | ETA taxes that would be borne by portfolio of which a Crown agent was legal owner would contravene s. 125 | 298 |
| Tax Topics - Statutory Interpretation - Interpretation Act - Section 8.1 | “trust” interpreted in accordance with its common law meaning | 349 |
| Tax Topics - Excise Tax Act - Section 122 | s. 122 does not preclude imposition of collection duties | 302 |
Milne Estate (Re), 2019 ONSC 579
Each of the late Mr. and Mrs. Milne had a primary will, which dealt with property for which the executors determined that grant of authority by a court of competent jurisdiction was required for transfer or realization of the property, and a secondary will for the balance of their property. The application judge had denied applications for a Certificate of Appointment of Estate Trustee respecting the primary wills on the ground that such wills viewed as purported trusts failed on the basis of uncertainty of subject matter (i.e., the allocation clause referred to above failed to identify the deceased’s property to which it applied.
Before setting this order aside and directing that the Certificates of Appointmentbe be issued, Marrocco ACJ stated (at paras 34-35) that a will (which “is an instrument by which a person disposes of property upon death”) may “contain a trust, but this is not a requirement for a valid will” and quoted with approval (at para. 37) the statement in Williams on Wills that “Although the title to the assets vests in the personal representative … the property comprised in residue is not held in trust for the beneficiary under the will so as to invest any equitable interest in him.”
Although it thus was unnecessary to demonstrate certainty of subject matter respecting the primary wills, any such requirement nonetheless would be satisfied. Marrocco ACJ stated (at para. 49):
The property in the Primary Wills can be clearly identified because there is an objective basis to ascertain it; namely whether a grant of authority by a court of competent jurisdiction is required for transfer or realization of the property.
Moules Industriels (C.H.F.G.) Inc. v. The Queen, 2018 TCC 85
The taxpayers, in connection with arguing (at para. 62) that the reference in the preamble to s. 256(1.2)(f)(ii) to “shares … owned .. by a trust” should be interpreted as referring only to shares that had been earmarked under the deed of trust for the beneficiaries, went on to argue (para. 1261) that, having regard to Art. 1261 of the Civil Code, a Quebec trust was not the owner of the property in its patrimony. Art. 1261 provided:
The trust patrimony, consisting of the property transferred in trust, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary and in which none of them has any real right.
Lamarre ACJ, in rejecting this submission, and after noting that s. 104(1) was a deeming provision that departed from the private law enunciated in Art. 1261, stated (at para. 75, TaxInterpretations translation):
Furthermore, if the taxpayers’ submission were accepted, all the provisions of the ITA (section 107 and following) permitting the transfer without tax consequences on the distribution in the Province of Quebec of property of a trust to its beneficiaries would have no application. In my view, adopting such a proposition would go contrary to the intention of Parliament. I do not believe that it was its intention to exclude Quebec trusts from such favourable treatment.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.2) - Paragraph 256(1.2)(f) - Subparagraph 256(1.2)(f)(ii) | a numerical cap on trustees’ discretion to allocate income or capital did not stop tainting under s. 256(1.2)(f)(ii) | 245 |
Canada v. Cheema, 2018 FCA 45
In order to satisfy lender requirements, the individual taxpayer persuaded a friend (Dr. Akbari) to jointly sign an agreement for the purchase of a new home. The Ontario new housing rebate rules required that each individual who becomes liable under the purchase agreement is acquiring the new house as the primary place of residence of that individual or a relation. “From the beginning it was understood that Dr. Akbari would not have any real interest in the property” (para. 4) and, indeed, at the closing of the purchase Dr. Akbari executed a declaration of trust in favour of the taxpayer.
Stratas JA (speaking for the majority, with Webb JA dissenting) nonetheless found that Dr. Akbari’s co-signing of the purchase agreement precluded access to the rebate. The fact that Dr. Akbari “had no beneficial interest in the property” was “irrelevant” (paras. 93-94), as what mattered was that Dr. Akbari became liable to the builder under the purchase agreement when he signed it. His interpretation accorded with the principle (para. 110) that “an interpretation that favours administrative efficiency is more likely to have been intended by Parliament over one that does not” (i.e., CRA only need look at the purchase agreement to see who is the “legal acquirer” (para. 111) rather than sorting out beneficial interests.)
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) - Paragraph 254(2)(b) | third party who did not intend to occupy was liable at the purchase agreement time | 355 |
| Tax Topics - Excise Tax Act - Section 133 | s. 133 deemed an acquisition of future home on co-purchaser's signing purchase agreement, notwithstanding that no beneficial interest received on closing | 268 |
| Tax Topics - Statutory Interpretation - Ordinary Meaning | Court should not depart from usual interpretation principles in seeking a sensible result | 128 |
| Tax Topics - Statutory Interpretation - Ease of Administration | interpretation that favours administrative efficiency is to be favoured | 206 |
| Tax Topics - Excise Tax Act - Regulations - New Harmonized Value-Added Tax System Regulations, No. 2 - Section 40 | co-purchaser with no intended beneficial interest was required to satisfy ETA s. 254(2) rules | 171 |
Barclays Wealth Trustees (Jersey) Limited v. Commissioners for Her Majesty's Revenue and Customs, [2017] EWCA Civ 1512
On June 21, 2001, an Ireland-domiciled individual (“Dreelan”) paid £100 to a New Jersey trustee (with successors, the “Trustee”) to hold under a discretionary trust (the “2001 Settlement”), the main beneficiaries being Dreelan, his spouse, and his children then living or born during a lengthy trust period. Further sums of cash were then settled by Mr Dreelan in June and July 2001. On February 4, 2003, Dreelan transferred 25,000 ordinary £1 shares in a UK-resident company ("Qserv"), to the Trustee. On April 6, 2003, Dreelan acquired a deemed domicile in the United Kingdom for purposes of the Inheritance Tax Act 1984 (the “IHTA”).
On April 4, 2008, the 25,000 Qserv shares were appointed to be held on the trusts of a second trust (the “DBJT”) of which the Trustee also was the trustee and in which Dreehan had an undivided interest. On July 3, 2008, the DBJT sold its Qserv shares for cash and an earn-out. On November 17, 2009, Mr Dreelan's share of the capital of the DBJT (excluding the earn-out) was revocably appointed to a separate sub-fund in the DBJT (“Michael's Fund”).
By a deed of appointment dated June 2, 2011 ("the 2011 Appointment"), the cash in Michael's Fund, representing the proceeds of the Qserv shares, was irrevocably appointed by the Trustee back to the 2001 Settlement.
S. 43(2) of the IHTA provided:
"Settlement" means any disposition or dispositions of property, whether effected by instrument, by parol or by operation of law, or partly in one way and partly in another, whereby the property is for the time being –
(a) held in trust for persons in succession or for any person subject to a contingency, or
(b) held by trustees on trust to accumulate the whole or part of any income of the property or with power to make payments out of that income at the discretion of the trustees or some other person, with or without power to accumulate surplus income… .
The case turned in part on whether the 2011 Appointment had the effect of restoring the cash sale proceeds to a status of property which had been settled on the 2001 Settlement at a time that the settlor (Dreehan) was not domiciled in the UK. Henderson LJ stated (at paras. 50, 52):
Mr Baldry [for HMRC] further submits that, with its focus on dispositions, the definition of "settlement" in section 43 leads to the conclusion that a separate settlement is created for IHT purposes whenever a settlor adds property to an existing settlement. Thus he did not shrink from submitting that in 2001 Mr Dreelan made three separate settlements for IHT purposes when he settled the original £100 on the trusts of the 2001 Settlement and then made two further transfers of property to it, even though any trust lawyer would say that Mr Dreelan had made a single settlement and then added property to it. …
…I consider the better view to be that the 2001 Settlement was a single settlement for IHT purposes, constituted by a number of separate dispositions of property to be held on the trusts thereof. Those dispositions included the three transfers to the Trustee made by Mr Dreelan in 2001, his transfer of the 25,000 Qserv shares to the Trustee on 4 February 2003, and the transfer effected by the 2011 Appointment. Not only is this how a trust lawyer or practitioner would view the matter, but it fits comfortably with the definition of "settlement" in section 43(2) which applies for all purposes of the 1984 Act. In particular, the express reference to "disposition or dispositions of property" in the definition is in my view naturally read as intended to cover the common situation where a settlement is first made, often with a small or nominal sum of money, and further assets are then added by the settlor.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions | trreat as real the inevitable incidents of the deemed fiction | 233 |
Markou v. The Queen, 2016 TCC 137
In connection with a leveraged donation arrangement, the taxpayers in the lending agreement directed the lender (“Capital”) to deliver the funds to a charity on their behalf. This was accomplished by Capital delivering the funds to its parent’s law firm (“FMC”) subject to a direction to deliver them to the charity’s law firm, whereupon in accordance with the lending agreement a debt relationship between Capital and the taxpayers was triggered.
In finding that he had the jurisdiction to make a determination under Rule 58(1) as to whether the proceeds that the taxpayers obtained from Capital were subject to a Quistclose trust, C. Miller J stated (at paras 19 & 21):
… The Tax Court of Canada can look at a taxpayer’s circumstances and make a determination as to what facts are true and what legal and equitable rights are available to the taxpayer where such findings will assist the court deciding the correctness of the assessment. The Tax Court of Canada cannot order what a court of equity can order as a result of finding an equitable trust exists. … It can, however, analyze the correctness of an assessment acknowledging any and all rights a taxpayer may have. …
In going on to conclude that there was not a Quistclose trust, he stated (at paras 23, 29, 34 & 35):
… the Quistclose trust… provides a right to a lender to an equitable remedy in situations where the lender has loaned funds to a borrower for a specific purpose, and where the lender is exposed to the risk of other creditors swooping in and snatching those funds from the borrower before the borrower uses them for the intended purpose. …
… With the Quistclose trust, the property is vested with the borrower who has a fiduciary obligation to use funds for a specific purpose or return the funds to the lender. …
… The Appellants, in granting an irrevocable authority to Capital to deliver monies to the charity, had exhausted any power they might have had while the funds were held by FMC. Capital, and only Capital, could direct FMC: the Appellants could not, once the funds were delivered to FMC, direct otherwise. …
… I have concluded that until the funds were delivered to the charity’s lawyers, the Appellants had no legal or beneficial interest in the funds. Once delivered to the charity’s lawyers, the Appellants had a debtor/creditor relationship with Capital. That is all.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation Act - Section 8.1 | TCC has jurisdiction to determine existence of equitable remedy | 96 |
| Tax Topics - General Concepts - Payment & Receipt | funds in leveraged donation scheme essentially advanced by lender directly to charity | 108 |
Advocate Gen. for Scotland v. Murray Group Holdings Ltd., [2015] CSIH 77, [2015] BTC 36 (Ct. of Ses. (Inner House, 2nd)), aff'd sub nomine RFC 2012 Plc (formerly The Rangers Football Club Plc) v Advocate General for Scotland (Scotland) [2017] UKSC 45
In the course of finding that the (Scottish) Inner Court was entitled to decide on questions of English trust law that were relevant to a tax scheme using trusts governed by English law, Lord Drummond Young, stated (at para. 50) that:
No doubt the theoretical nature of a trust is different, being based on the notion of legal estate and equitable interest in England, whereas in Scotland it is based on the notion of dual patrimonies of the trustee. Nevertheless the practical results are similar… .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | income derived from service is assessable even where agreed to be redirected to 3rd party | 329 |
| Tax Topics - General Concepts - Evidence | Scottish Court of Session entitled to deal with questions of English law | 300 |
Mariano v. The Queen, 2015 DTC 1209 [at at 1331], 2015 TCC 244
The taxpayers were participants in leveraged donation transactions which included gifts of courseware licences to a Canadian–resident Trust with a corporate trustee. Ostensibly, the licences then were distributed to the program participants such as the taxpayers after they had been added as capital beneficiaries, with the participants then donating them to CCA. The definition of a capital beneficiary included individuals (subject to specified exclusions) had made written application to the Trustee for consideration for inclusion as a Capital Beneficiary, had made charitable donations to one or more registered charities in the calendar year of such application and received receipts in prescribed form for such donations.
In finding that the Trust was void for lack of certainty of objects, Pizzitelli J stated (at para. 79):
[T]he class of beneficiaries is so hopelessly wide as to not form anything like a class. If "all the residents of London" were too wide a group to form anything like a class, as found in McPhail above, then I must agree that all Canadians who made a charitable donation and anyone else in the world who made a charitable donation entitling them to a prescribed tax receipt from Canadian registered charities is even wider.
See summary under s. 118.1 - total charitable gifts.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Fair Market Value - Other | courseware licences valued at modest initial cost, given relevant wholesale market and depressive effect of huge volumes purchased | 303 |
| Tax Topics - General Concepts - Ownership | no acquisition of unascertained property | 76 |
| Tax Topics - General Concepts - Sham | taxpayer involvement in deceit unnecessary | 375 |
| Tax Topics - Income Tax Act - Section 107 - Subsection 107(2) | delegation of power of appointment to promoter not authorized | 238 |
| Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts | no gift where no intent for impoverishment and where gifted property not yet identified | 566 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(35) | attempted use of initial gift to step-up ACB under s. 69(1)(c) | 262 |
Al-Hossain v. The Queen, 2014 TCC 379
To secure mortgage financing for his home purchase, the appellant's friend ("Khandaker") agreed to co-sign the mortgage documents and to be placed on title as a co-owner. Less than three weeks after closing, they signed a statutory declaration stating that the appellant was the 100% beneficial owner and that Khandaker held a 0.01% interest in trust for the appellant. In rejecting a submission that the appellant was the sole beneficial owner (so that the new housing HST rebate was available to him), Lyons J stated (at para. 27):
The creation of a trust must be properly documented containing the requisite elements of a trust, dated, signed and in existence prior to or contemporaneous with the matter that is the subject of the trust arrangement.
See summary under ETA s. 254(2).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 254 - Subsection 254(2) | co-owner was not occupant and bare trust declaration was too late | 282 |
| Tax Topics - General Concepts - Effective Date | bare trust declaration was too late | 138 |
Sheila Holmes Spousal Trust v. Canada (Attorney General), 2013 ABQB 489
The federal Minister assessed the settlor of the appellant trust on the basis that the trust's taxable capital gain and investment income were taxable in his hands because the trust was a sham or invalidly settled, or because s. 75(2) applied. The settlor then filed a notice of objection. The Minister, as agent for the Government of Ontario, issued alternative reassessments in respect of the trust's Ontario provincial tax liability on the basis of the alternative conclusion that the Trust, if valid, was taxable in Ontario, not Alberta. The trustee for the trust filed a notice of objection to this assessment. In dismissing an application to the Court to declare that the trust was valid, Nixon J adverted to the principle in Addison & Leyen Ltd v Canada, 2007 SCC 33 (CanLII), [2007] 2 S.C.R. 793, at para. 11 that "Judicial review should not be used to develop a new form of incidental litigation designed to circumvent the system of tax appeals established by Parliament and the jurisdiction of the Tax Court," and stated (at para. 66):
The only dispute with respect to the validity of the Trust is with the CRA in relation to the payment of tax.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Rectification & Rescission | superior court declines jurisdiction in tax dispute | 215 |
Peragine v. The Queen, 2012 DTC 1287 [at at 3887], 2012 TCC 348
Webb J. found that the taxpayer held a real property as an agent (and hence as a bare trustee) of his brother. The evidence consistently showed that the property was acquired for, and used in, the taxpayer's brother's business, and that mortgage payments came from the brother's business income. Although the proceeds of disposition of the property were disbursed to the taxpayer, the taxpayer only transferred the funds to his brother or to third parties at his brother's direction and for his brother's benefit.
Lipson v. The Queen, 2012 DTC 1064 [at at 2796], 2012 TCC 20
The taxpayers received a number of capital distributions from the liquidator of their mother's "succession" (a Quebec estate), but only filed a notice under s. 116(3) respecting the final distribution. The Minister assessed penalties against the taxpayers on the basis that the taxpayer was deemed under para. (d) of the definition in s. 248(1) of disposition to have disposed of taxable Canadian property (an interest in a trust) without filing the required notices under s. 116(3) respecting the previous distributions.
Jorré J. allowed the taxpayer's appeal. A Quebec succession is not a trust. Although s. 104(1) provided that a reference to "trust" or "estate" included an executor or a liquidator of a succession, this merely facilitated a drafting technique to permit the word "trust" or "estate" to refer both to a trust or estate, and the persons charged with responsibility for carrying out the obligations of the trust or estate, as the case may be. In particular, he stated (at paras. 29-30):
What this drafting technique does is avoid the necessity of distinguishing between the trust or estate and the person charged with doing something; one has to read each section referring to "trust or estate" as referring either to the trust or estate or to the person given an obligation in relation to the trust or estate. The technique also avoids the necessity of repeating a series of alternative persons who may be the person who has the obligation.
That is the effect of the attribution of meaning provided for in subsection 248(1): it is not to treat an estate as a trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 116 - Subsection 116(3) | 184 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxable Canadian Property | 184 |
Fourney v. The Queen, 2012 DTC 1019 [at at 2575], 2011 TCC 520
Seeking to protect herself from being sued by her brother, the taxpayer transferred title to all her real properties for no consideration to corporations under her majority control. She reported rental and business income and expenses from these properties while her accountant did the same in the corporations' returns. The Minister's reassessment included the inclusion in her income of a taxable capital gain on a disposition of the properties to the corporations.
Hogan J. noted (para. 30) that "a transfer of property for no consideration generally results in a rebuttable presumption of a resulting trust" . This presumption was further supported by the fact that, following the transfer, the taxpayer continued to operate the business properties in a personal capacity. All invoices for repairs and renovations, and all rent cheques were addressed to her personally, and all income and expenses went into or came from her personal bank accounts; and the corporations held themselves out to third parties as the property owners only in limited circumstances.
Hogan J. found that the resulting trust was a bare trust, in which the corporations could reasonably be considered to have acted as mere agents for the taxpayer. The trust was therefore not a "trust" for the purposes of the Act, pursuant to s. 104(1). Furthermore, the transfer was not a "disposition" under s. 248(1) because, as per paragraph (e), the taxpayer retained beneficial ownership. The income and expenses on the properties therefore were those of the taxpayer, and she did not realize a capital gain on the transfer.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Agency | 191 | |
| Tax Topics - General Concepts - Corporate/Separate Personality | 257 | |
| Tax Topics - General Concepts - Ownership | presumption of resulting trust where property transfer for no consideration | 257 |
| Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) | line codes in electronic filings were incomprehensible to taxpayer | 300 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | rebuttable presumption of resulting trust on transfer for no consideration | 257 |
Canpar Developments Inc. v. The Queen, 2011 GSTC 118, 2011 TCC 353 (Informal Procedure)
The taxpayer's transfer of a real property to its two shareholders, made for the purpose of securing a bank loan, did not give rise to an implicit trust. Among the reasons given, Paris J. pointed out that the shareholders had never advised the bank of the existence of a trust, which supported the inference that there was no trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 285 | 224 |
Canada v. General Motors of Canada Limited, [2009] GSTC 64, 2009 FCA 114
GMCL (a car manufacturer), which was the administrator of various defined benefit pension plan trusts for its employees, and for which Royal Trust was the trustee, was not a trustee, so that ETA s. 267.1 had no application to it.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) | services for pension plans represented compensation costs relating to taxable sales | 133 |
| Tax Topics - Income Tax Act - Section 169 - Subsection 169(1) | 99 | |
| Tax Topics - Excise Tax Act - Section 267.1 - Subsection 267.1(2) | administrator of pension trust was not a trustee, and not subject to s. 267.1 | 51 |
De Mond v. R., 99 DTC 893, [1999] 4 CTC 2007 (TCC)
The taxpayer settled a trust governed by U.S. law (the “Family Trust”) for the purpose of ensuring that its property could be rolled into separate trusts for the benefit of others upon his or his wife’s death without going through probate. He testified that the Family Trust did not hold any property but was merely an instrument to hold three sub-trusts: the husband’s, wife’s and joint property trust. He transferred his own property to the husband’s trust.
The Family Trust entered into a Partnership Agreement to become a limited partner and then through its “trustors,” i.e., trustees (the taxpayer and his wife) signed a separate declaration of trust declaring that the Family Trust held the limited partnership interest as bare trustee for the husband’s and wife’s trusts as to respective 90% and 10% interests.
The taxpayer claimed the partnership’s loss as his own loss as to a 90% share.
Lamarre J accepted that the Family Trust held the partnership interest as bare trustee for the husband’s and wife’s trusts. In finding that the husband’s trust also was a bare trust respecting the partnership interest, so that its share of the losses flowed through to the taxpayer individually, she stated (at paras. 46-48):
According to the Declaration of Trust, the appellant, as trustee of the husband's trust, is to accumulate or distribute the net income and principal thereof as the husband may direct from time to time. Under that same Declaration of Trust, the beneficiaries are the trustors while both trustors are alive.
Furthermore, while both trustors are living, only the husband has the power to revoke the husband's trust and, should he exercise it, the trustee must deliver to the husband any separate property in the husband's trust (the same applies to the wife's trust). It seems to me, therefore, that the appellant can cause the husband's trust's share of the Partnership interest to revert to him at any time….
It is therefore difficult to say that the trustee has significant powers or responsibilities and can take action without instructions from the settlor, or that the trustee is not subject to the control of his beneficiary, since the appellant in fact plays the roles of all three of the constituent parties to the trust: he is the settlor, the trustee and the beneficiary of his own trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(2) | revocable living trust was a bare trust | 165 |
Administrative Policy
CRA Webpage, Enhanced reporting rules for trusts and bare trusts: Frequently asked questions, updated on 14 March 2025
Meaning of trust
1.1. What is a trust? …
Separation of legal and beneficial ownership
Ordinarily, a person who has legal title to a property also has the ability to use, enjoy and “benefit from” the property. Under the law of equity in common law provinces and territories (i.e., outside the Province of Québec), a trust is a relationship in which the legal and beneficial ownership of property are separated, meaning that the person who holds legal title to the property is generally not the same person as the person who is or may be beneficially interested in it.
This separation of legal and beneficial ownership means that in an “ordinary” (non-bare) trust such as a family trust, the trustee exercises control over the trust property and is under a fiduciary duty to act for the benefit of the beneficiaries according to the terms of the trust. The beneficiaries have rights against the trustees to enforce the terms of the trust. …
Trust vs. agency and bare trusts
Trust relationships are distinct from agency relationships, even though both trustees and agents act on behalf of other persons. While a trustee administers property on behalf a beneficiary under a trust, an agent acts on behalf of a principal under an agency agreement. An agent may manage or deal with the principal’s property but does not usually acquire legal title to it. A person who is required to manage and dispose of trust property and who can exercise independent discretionary power over the property is a trustee rather than an agent. The trustee of a bare trust, in contrast, acts as an agent for the beneficiaries when dealing with trust property.
Meaning of "bare trust"
3.1. What is a bare trust?
The term "bare trust" is not defined in the Income Tax Act. However, a bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property.
A trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property. In order for the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trust to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 162 - Subsection 162(7) | no s. 162(7) penalty for 2023 taxation year of bare trust unless gross negligence | 142 |
| Tax Topics - Income Tax Act - Section 163 - Subsection 163(5) | no s. 163(5) penalty for 2023 taxation year of bare trust unless situation egregious | 191 |
| Tax Topics - Income Tax Act - Section 150 - Subsection 150(1.2) | 180 | |
| Tax Topics - Income Tax Regulations - Regulation 204.2 - Subsection 204.2(1) | 66 | |
| Tax Topics - Income Tax Act - Section 163 - Subsection 163(5) | 126 | |
| Tax Topics - Income Tax Act - Section 150 - Subsection 150(1.2) - Paragraph 150(1.2)(a) | 80 |
22 July 2023 Internal T.I. 2021-0883241I7 - Entity classification of Liechtenstein stiftung
A Liechtenstein stiftung was formed as a family foundation (later changed to a private-benefit foundation), with a capital contribution from the founder, in order to invest its funds and make distributions to beneficiaries as determined in the discretion of its foundation council. It had legal personality and owned the property allocated by the founder. Its board of curators had the irrevocable power to elect or replace members of the council. It filed a tax return, reporting the disposition of taxable Canadian property, on the basis that it was a corporation rather than a trust.
CRA first noted that separate legal personality was no longer a determinative characteristic, that “[d]escribing a trust by reference to dual ownership or equity in an international context would have the result of ignoring all civil law arrangements that have adopted the trust idea of the administration of assets for the benefit of others” and that the stifting had “characteristics common to trusts under Canadian commercial law” including those discussed in 2007-0236981I7 regarding a Pennsylvania business trust. It concluded that the stiftung had more in common with a trust than a corporation:
- It had no form of “share capital” or other ownership interests which conveyed a right to distributions of earnings or capital
- it was created by an endowment from a founder much like a trust settlement
- it had beneficiaries, named in its by-laws
- its executive bodies administered and used the property transferred by the founder for the benefit and advantage of the beneficiaries similarly to a trustee
- unlike a corporation, it was restricted to investing rather than carrying on a commercial business.
These conclusions were consistent with 2008-0266251I7 and 2010-0388611I7.
2024 Ruling 2019-0817961R3 - Swiss Collective Investment Scheme
A collective investment scheme (the “Fund”) established under Swiss law is an arrangement by which investors pool their assets to be managed by and in the name of a Swiss regulated fund management company (the “Management Company’) for the account of the investors, whose proportionate entitlements to income and to cash or in-kind redemption proceeds are represented by non-voting units. The Fund was established by a contract of the investors with the Manager and the non-resident custodian of the Fund assets (the “Custodian”), and lacks legal personality. The Custodian delegated the custody of Canadian securities (being mostly listed shares of Canadian companies) to the “Canadian Sub-Custodian.” The Fund unitholders are all Swiss entities providing pension or retirement plans.
CRA effectively ruled that this arrangement would be treated like a co-ownership arrangement rather than like an entity such as a trust, so that dividends paid on the Canadian shares would benefit from the Canadian withholding tax exemption in Art. 10 of the Canada-Swiss Treaty for Canadian dividends received by Swiss pension/ retirement entities.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Treaties - Income Tax Conventions - Article 10 | Swiss collective investment vehicle treated as flow-through for purposes of the pension/ retirement fund dividend exemption in the Canada-Swiss treaty | 259 |
29 November 2022 CTF Roundtable Q. 9, 2022-0950531C6 - Multiple Wills and T3 Reporting
Where an individual has two wills (one of them not being subject to probate) so that the two wills are administered separately, does s. 104(2) apply so that one T3 return is filed for the estates created under both wills?
CRA responded that, even though the wills could be administered separately, the individual would be regarded as having only one estate and thus (since a trust is defined in s. 248(1) to include an estate unless the context otherwise required), there would only be one trust. There being only one trust, the postamble to s. 104(2) could not apply, and only one T3 would be filed for each taxation year.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(2) | s. 104(2) cannot apply where there are multiple wills since there is only one trust | 113 |
15 June 2022 STEP Roundtable Q. 16, 2022-0927601C6 - Foreign Entity Classification of a Foundation
Is a foundation created under the laws of a country where civil law applies treated as a trust under the Act?
After referring to its two-step approach to foreign entity classification, CRA indicated that, since the classification of a particular entity or arrangement is to be determined on a case-by-case basis, it will consider the classification of a foreign foundation in the context of an advanced income tax ruling, provided that the ruling request is supported by a complete description of the characteristics, an analysis as to the proper classification of the entity or arrangement for purposes of the Act and Regulations, a discussion of the way the relevant provisions would apply to proposed transactions involving or affecting the rights and obligations of the entity or arrangement and its stakeholders, a copy of the foreign legislation applicable, and any other relevant documents.
7 October 2021 APFF Financial Strategies and Instruments Roundtable Q. 6, 2021-0896061C6 F - Prolonged Administration of an Estate
The will of Mr. X, a resident of Quebec, left all of his property in equal shares, to his two children, aged 10 and 15. His will included an extended administration clause that resulted in an extension of the executor’s duties and authority beyond the normal end of the administration of the estate, until all the legacies were delivered in accordance with the terms of the will (which was directed to occur on the children attaining 25). The will provided that, in the meantime, all income generated on each child’s share was to be used in the executor’s discretion for the support or maintenance of that child, with discretion to encroach on capital in the child’s favour.
Before turning to the potential application of s. 104(18), CRA indicated that if the effect of the clause was to extend the administration of the estate, then it extended the estate qua trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(18) | s. 104(18) can apply where an executor has discretion to defer the payment of income for the benefit of minor beneficiaries over an extended period | 330 |
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(6) | s. 104(18) overrode the s. 104(6) requirement to make income payable in the year | 295 |
2018 Ruling 2017-0738041R3 - XXXXXXXXXX
Fund
The Fund constitutes a collective investment vehicle that is not a body corporate, a partnership or a limited partnership, under which the Unitholders by contractual arrangements (set out in a deed) between a manager and a depositary, beneficially own the underlying property as tenants in common – with their Units representing proportionate interests in the Fund. Contracts entered into by the non-resident manager for the acquisition, management or disposal of property are binding on the unitholders. Pooling in relation to separate parts of the property is permitted and the Unitholders are entitled to exchange rights in one part for rights in another.
Subfund
The Deed states: “Any reference in this Deed to Units being issued “in respect of” a Sub-fund or “relating” to a Sub-fund shall be construed as a reference to Units which give the holder of them co-ownership of that part of the … Property comprising the Sub-fund in question and the entitlement … to exchange co-ownership of that part of the … Property for that part of the … Property comprising any other Sub-fund.” Each Sub-fund holds a separate group of assets to be managed by the Investment Manager, with the rulings relating to particular Sub-funds which may hold Canadian securities.
Classes within Subfund
The Units of a particular Sub-fund may be further broken down into different Classes which, although they participate proportionately in the ownership of the assets of the particular Sub-fund, may differ in other respects (e.g., management fees, functional currency; and different entitlements to gross income net of withholding tax which may arise due to different Unitholder tax profiles.) Investors with different tax profiles are required to invest in separate Classes such that investors do not benefit from the tax status of others (e.g., a lower withholding tax rate).
Depositary and Custodians
The non-resident Depositary, who deals at arm’s length with the manager, is responsible for acting as depositary of the Fund in accordance with the Deed. The Depositary has delegated its duties and responsibilities to the Custodian (a non-resident subsidiary of the Depositary) which, in turn, has delegated its Canadian duties and responsibilities (namely its duties and responsibilities respecting Canadian securities) to the Sub-custodian, a Canadian subsidiary of the Depositary.
Country A tax treatment
The Fund is regarded as fiscally transparent by Country A. For Country A capital gains tax purposes, a switch of Units in one Sub-fund for Units in any other Sub-fund is treated as a redemption of the Original Units and a purchase of New Units.
Rulings
The Fund and each of the relevant Sub-funds is treated as fiscally transparent for the purposes of the Act.
For the purposes of Part XIII and s. 116, any amount paid by a person to the Sub-custodian respecting Sub-fund Canadian securities will be considered to arise at the time of payment and to have the same character and source in respect of each Unitholder thereunder in proportion to the number of Units held by that Unitholder that represents its participation in such property.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) | collective investment vehicle treated as transparent for Pt XIII purposes | 179 |
2017 Ruling 2015-0605161R3 - Fonds commun de placement (FCP) - Luxembourg
Fund and Sub-Funds
The Fund, which is UCITS (collective investment in transferable securities) constituted under the Luxembourg law of contract as an FCP (“Fonds commun de placement” being an undivided collection of transferable securities and other liquid assets) does not have a legal personality but instead is an unincorporated co-proprietorship of transferable and other liquid financial assets. The Fund is an “umbrella fund” that enables investors (namely, pension funds) to invest in one or more portfolios (each constituted as a Sub-Fund) by acquiring a class of Units of a particular Sub-Fund issued by the Manager in accordance with the Management Regulations. In order to ensure that each Unitholder receives payments of Gross Income (e.g., dividends or interest) that reflect their applicable withholding tax rates, Unitholders with different tax profiles and country of residence will invest in different Unit Classes.
Unitholders
The Management Regulations provide that each Unit of a Sub-Fund represents the proportion of each Unitholder’s ownership interest in the assets and liabilities comprising the Sub-Fund to which each Unitholder is beneficially entitled. Ownership of Units entitles a Unitholder to participate and share in the property of the relevant Sub-Fund including interest and dividends derived therefrom. Under the applicable Luxembourg statute, the liabilities of a Unitholder are limited to the Unitholder’s participation in a particular Sub-Fund. Unitholders can redeem their Units of a Sub-Fund in the manner set out in the Management Regulations, for an amount based on the net asset value per Unit of a particular Class of Units in a particular Sub-Fund.
Proposed transactions
The Sub-Funds will issue Units to New Investors. The Fund will continue to operate as an open-ended umbrella fund, which means that there will be multiple Sub-Funds in which a New Investor may invest.
Rulings
The tax consequences to the New Investors of their investments in the Fund will be determined on the basis that the Fund, including each of its Sub-Funds, is not a person or a taxpayer for the purposes of the Act and as such, is treated as fiscally transparent for such purposes.
For the purposes of Part XIII and s. 116, any amount paid or credited by a payer to the sub-custodians in respect of property held by a Sub-Fund on behalf of the New Investors, including purchase consideration for such property, will be considered an amount paid or credited to the New Investor in proportion to its co-ownership interest in the assets and Gross Income of the particular Sub-Fund.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 | Luxembourg investment mutual fund was a co-ownership arrangement | 144 |
2016 Ruling 2015-0606141R3 - XXXXXXXXXX
Current structure
The Umbrella Fund is an open-end fund with Subfunds, all of them governed by Fund Contracts under the laws of a common law jurisdiction. The Subtrusts focus on (i) bonds denominated in specified currencies, (ii) foreign currency inflation-linked bonds or (iii) domestic and foreign equities and real estate securities. The Management Company and Custodian both are non-resident.
Pursuant to the Fund Contract (to which the Management Company and the Custodian Bank also are parties), on subscribing, the Unitholders acquire, own and share in the property of a Subfund as co-owners, evidenced in the form of fund Units. As such, the Unitholders are entitled to an undivided interest as tenants in common in the assets held therein and are entitled to all income and gains derived from same as such income or gains arise in accordance with the Units they acquire. Each Unit (which is non-voting) represents a claim against the Management Company conferring entitlement to the assets and income of a Subfund. A Unit is specified to not "confer any interest or share in any particular part of the assets of the [funds]." The fund and Subfunds do not have separate legal personality. The liabilities of a Unitholder are limited to the Unit subscription amount.
The sole Unitholder of the relevant Subfunds is the Pension Fund, a tax exempt entity that meets the requirements for exemption from Part XIII on dividends paid by corporations resident in Canada tax under the applicable Tax Treaty.
Pursuant to the Fund Contract, the Management Company, among other things, manages the Subfunds at its own discretion and in its own name, but for the account of the Unitholders.
Pursuant to the Canadian Agreement, the Custodian Bank has appointed the Canadian Sub-custodian as custodian of Canadian securities received by the Canadian Sub-custodian from or on behalf of the Custodian Bank.
Proposed transactions
The arrangement will invest in publicly traded shares of Canadian public corporations as well as in shares of private Canadian corporations whose intention is to become publicly listed within 12 months.
Rulings
The fund, including each of its Subfunds, is not a person or a taxpayer for the purposes of the Act and as such, they are treated as fiscally transparent for the purposes of the Act.
For the purposes of Part XIII withholding and section 116, any amount paid or credited by a payer to the Canadian Sub-custodian in respect of the property held by the Subfund on behalf of the Pension Fund, including purchase consideration for such property, will be considered an amount paid or credited to the Pension Fund in proportion to its participation in the assets and income of the particular Subfund.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 | common contractual fund was fiscally transparent | 129 |
12 July 2016 External T.I. 2014-0560361E5 - Cdn beneficiary of US living trust
A U.S. revocable living trust is a trust that is usually controlled by and established for the benefit of those who created the trust (“grantors”) during their lifetime. … Where the grantor can change the terms of, or completely revoke the trust during their lifetime, they effectively retain control of the trust assets.
…[The] trust is an excluded trust…where the arrangement is such that the trust/trustee can reasonably be considered to act as an agent for all the beneficiaries unless the trust is described in any of paragraphs (a) to (e.1) of the definition of trust in subsection 108(1). This determination is a legal question of fact, and depending on the specifics of each case a particular grantor trust may in fact be such an excluded trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) | potential application to U.S. revocable living trust | 190 |
| Tax Topics - Income Tax Act - Section 126 - Subsection 126(1) | whether there is a foreign tax credit for US tax paid by the grantor of a revocable US living trust | 256 |
10 June 2016 STEP Roundtable Q. 10, 2016-0645781C6 - US Revocable Living Trusts
A U.S. resident (the “grantor”) settles a “revocable living trust” with property including taxable Canadian property. The grantor: is the sole trustee; until death is the sole beneficiary with rights to income and any encroachments of capital; and may revoke the trust at any time. The trust provisions may provide for a distribution of the trust property to named beneficiaries upon the death of the grantor. In light of De Mond, does this arrangement constitute a trust?
CRA indicated that De Mond has not altered its view (in 9518515) that a revocable living trust is recognized at the time that legal title to property is transferred to it, with such transfer being considered to occur at fair market value. The key distinction between a revocable living trust, and a bare trust, is that the former generally includes remainder beneficiaries, so that there is a change in beneficial ownership when property is transferred to the trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 70 - Subsection 70(5) | transfer to remainder beneficiary of a U.S. revocable living trust on death does not occur as a consequence of death | 126 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(a) | remainder beneficary of inter vivos trust | 165 |
2014 Ruling 2013-0496831R3 - Irish Common Contractual Fund
Description of CCF
"CCF" is a common contractual fund established pursuant to the Investment Funds, Companies and Miscellaneous Provision Act 2005 (Ireland) (the "Investment Funds Act"), which provides that a common contractual fund is an unincorporated body established pursuant to a deed of constitution by a management company, under which co-owners participate and share in the collective investments by virtue of holding units and with the property being entrusted to a custodian for safe-keeping in accordance with conditions imposed by the Central Bank of Ireland and with the deed of constitution (which is binding on the unitholders) specifying the conditions for the replacement of the management company or custodian. Each Unit is defined as one undivided co-ownership interest in the properties of the CCF (currently mostly equities of non-Canadian public companies), with the Unitholder holding the co-ownership interests as tenant in common with the other Unitholders. Unitholders may redeem their Units (which are non-voting) on and with effect from any dealing day at the net asset value per Unit and Units may also be converted to Units of a different class. "[T]the Custodian in its capacity as trustee, shall ensure that the sale, issue, conversion, repurchase, redemption, and cancellation of Units effected by or on behalf of the Manager, are carried out in accordance with the Investment Funds Act and the Deed of Constitution." The Custodian and Manager are non-residents.
Irish tax
The CCF is not subject to Irish tax as Unitholders are treated under s. 739I of the Taxes Consolidation Act 1997 (Ireland) as having directly earned income on the CCF properties in proportion to their Unitholdings.
Proposed transactions
CCF, which is a "single strategy" fund under Part 2 of the Investment Funds Act, will extend its investments to equities of Canadian public companies and will accept investments from Canadian residents which are exempt under s. 149(1).
Rulings include
"[E]ach "New Investor" will be treated as the co-owner of an undivided interest as tenant in common with the other Unitholders in each property held by the CCF, …any amount paid or credited by a person resident in Canada to the Custodian in relation to the properties held by the CCF will be an amount paid or credited to each New Investor in proportion to the New Investor's ownership interest in the properties of the CCF …[and s.] 94(3) will not apply to the CCF."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 | Irish common contractual fund respected as co-ownership | 54 |
22 November 2013 External T.I. 2013-0511771E5 - Beneficial Ownership - Disposition
As the taxpayer's daughter did not qualify for a mortgage at the time of her purchase of her home, the bank required legal title to be placed in the taxpayer's name. With the mortgage now having been paid in full by the daughter, legal title will be transferred to her. CRA stated:
[Y]our daughter is likely the beneficial owner of the home. If that is the case, then the transfer of legal title of the house to your daughter would not result in any income tax consequences… .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Ownership | mother as nominee for daughter's house | 94 |
8 May 2012 CALU Roundtable Q. 6, 2012-043564
Shareholders of a corporation use a buy-sell agreement to requires the corporation to acquire insurance on the shareholders' lives (and pay the premiums thereunder) to fund share purchase obligations under the agreement, and further agree to use a third party (the "Insurance Trustee") to hold and apply the insurance proceeds as directed under the agreement, with the corporation being required to pay any insurance proceeds over to the Insurance Trustee upon receipt. Before indicating that such proceeds would be added to the capital dividend account of the corporation as amounts received by it, CRA stated:
A trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee's only function is to hold legal title to the property. In order for the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trust to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property.
7 October 2011 Roundtable, 2011-0411841C6 F - Succession
As of June 30, 2011, all the liabilities of Succession X have been paid and all the liquidator's duties have been completed, and its only asset of Succession X is cash, which is required to be divided equally between the two heirs (Mr. X's two children). However, Mr. A, the liquidator, will wait until the year 2025 before proceeding with distributing the money to the beneficiaries and liquidating Succession X. Is the period for proceeding with the liquidation reasonable? CRA responded:
Whether the time to liquidate an estate is reasonable is a question of mixed fact and law that requires a complete analysis of all the facts in a particular situation. Generally, a succession exists as long as it is not settled.
In this case, it is possible that as of June 30, 2011, the succession will be settled and cease to exist on that date. In such a case, the tax would be subsequently imposed at the level of the legatees of the estate.
15 July 2010 Internal T.I. 2010-0353701I7 - Classification foreign entity - Trust Enterprise
Ruling that a Liechstenstein Trust Enterprise would be a trust rather than a corporation. Although it had centralized control, continuity of management and existence, issuance of transferable coupons which might be assimilated to shares, limited liability of coupon holders and legal personality and the ownership of assets, on the other hand it had limited objects, beneficiaries who were not entitled to vote and who did not pay for their interest and who could be liable if they enriched themselves, the application to the entity of rules of equity and references to it as a trust under the Liechtenstein law.
4 October 2010 Internal T.I. 2008-0289461I7 - Netherlands Antilles private foundation
A private foundation was created pursuant to the laws of the Netherlands Antilles and governed by Articles of Foundation. Its capital consists of assets contributed by the Founder, as well as other assets acquired from others, it may make distributions out of its assets (mostly securities) to such persons and entities as the Foundation Council may determine with the written consent of the Founder (but, in fact, the beneficiaries are listed in the Foundation’s Administrative Rules) and its Foundation Council members who commission its management are appointed by the Founder. Is the foundation a trust or corporation? The Directorate responded:
[T]he private foundation created pursuant to the laws of the Netherlands Antilles is similar, in some respects, to the civil law trust.
In order to characterize a Netherlands Antilles private foundation that displays both corporate and trust attributes, it will be necessary to determine what the distinguishing characteristics of a Canadian corporation are, as compared to a Canadian trust, and the weight that should be attached to each… . Once that is done, a characterization determination can be made by comparing those characteristics with the attributes of the Netherlands Antilles Private Foundation.
…[T]he Foundation possesses a separate legal existence from the beneficiaries of the Foundation...possesses its own capacity to acquire rights and to assume liabilities…[and t]he beneficiaries of the Foundation also are not personally liable for any of the debts incurred by the Foundation. In th[ese] respect[s], the Foundation is similar to a corporation. … [However] the Foundation does not issue share capital or something else which serves the same function… the beneficiaries do not pay for their interests in the foundation… the beneficiaries of a private foundation cannot transfer their beneficial interest in the foundation to someone else…[and] the beneficiaries of the Foundation never have the right to participate in the decisions of the Foundation. … [Accordingly] the attributes of a private foundation created pursuant to the laws of the Netherlands Antilles more closely resemble those of a trust under our common and civil law than a corporation. As such, the Foundation should be treated as a trust… . [T]he existence of a separate legal entity clause contained in the Netherlands Antilles legislation governing private foundations would not...preclude an arrangement from being considered as a trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation | Netherlands Antilles private foundation qualifies as a trust notwithstanding its separate legal personality | 109 |
2010 Ruling 2009-0345011R3 - Irish Common Contractual Fund
Irish contractual funds, which gave the unitholders proportionate undivided co-ownership interests in the assets of each "sub-fund (i.e., portfolio) were not trusts to which s. 94(1) applied, with unitholders treated as earning or realizing directly the income or gains from the portfolio property.
9 June 2010 External T.I. 2009-0342081E5 F - Associé déterminé
Before going on to indicate that at trust could be considered to be actively engaged in the activities of a general partnership for purposes of the specified member definition on the basis of the conduct of the partnership’s management by its trustee, CRA stated:
Subsection 104(1) provides, inter alia, that, unless the context otherwise requires, a reference in the Act to a trust includes a reference to the trustee who controls the trust property. Consequently, in determining whether a trust, which is a member of a partnership, is actively involved in the partnership's activities, we are of the view that the degree of involvement of the trustee in the partnership's activities can be taken into account.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Specified Member | trust member of partnership can be actively engaged through the activities of its trustee | 176 |
18 September 2008 External T.I. 2008-0264381E5 F - Résidence d'une fiducie
Non-resident individuals entrusted the custody of certain funds to the Quebec office of a Canadian financial institution, which held the funds in the form of corporate securities and precious metals certificates, which were entrusted to it for safekeeping purposes. Now 10 of those individuals have died, and their heirs are non-residents. Are such securities held on their behalf held under trusts and, if so, is the trusts’ residence in Canada?
CRA indicated that given that the Canadian financial institution performs only custodial and safekeeping functions, there is no trust. After quoting the definition of legal representative, it stated:
A financial institution would generally not be considered a legal representative controlling the estate's assets solely because of its role as depositary and custodian of certain estate assets.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) | holding of assets by Canadian securities depositary and custodian would not be relevant to trust residence | 220 |
11 October 2007 Internal T.I. 2007-0236981I7 - Pennsylvania Business Trust
Before finding that a Pennsylvania business trust (PBT) was a trust for ITA purposes, the Directorate stated:
Professor Waters suggests that the four elements needed to recognize the trust concept regardless of the name given to the arrangement in issue are:
(1) the trust property must be segregated from the personal assets of the trustee;
(2) the trust property must be employed for the object of the trust (a beneficiary or a purpose);
(3) the trustee holds the title of the trust property and owes duties to the beneficiary as consequences both of the terms of the trust instrument and also of the law; and
(4) the right to recover identifiable property in specie from the trustee in breach, or from a third party aware of the breach.The terms of PBT clearly contain the four elements suggested by Professor Waters. The trustees hold the limited partnership interest for the benefit of the beneficiary, Corporation, such property being segregated from their personal assets and the trustees owe the Corporation the duties and obligations expressed in the trust agreement in respect of the trust property. As stated in 15 Pa.C.S.§ 9506, the provisions of Subchapters B relating to fiduciary duty and Subchapter D relating to indemnification of Chapter 17 are applicable to a Pennsylvania business trust. The fact that the PBT is subject to the same rules relating to fiduciary duty and indemnification as are applicable to other trusts governed by the law of Pennsylvania suggests that the fourth element is met as well.
2006 Ruling 2006-0199741R3 - Irish Common Contractual Fund
CCF
A Common Contractual Fund ("CCF") is a type of collective investment undertaking under which Unitholders by contractual arrangement acquire, own and share in the property of the CCF as co-owners, being entitled to an undivided interest as tenants in common in the property comprising the CCF. Accordingly, Unitholders are owners of, and are entitled to all income and gains derived from, the property of the CCF as such income and gains arise. It is legally valid for a CCF to have only one unit-holder.
Proposed transactions
The Manager, which is a corporation resident in Ireland, will constitute the "Fund" in accordance with a Deed of Constitution, so that it will qualify as a "CCF" described in s. 739I(1)(a)(ii) of the Taxes Consolidation Act 1997 (Ireland) (the "TCA"). This requires that: (i) it is an Undertaking for Collective Investment in Transferable Securities ("UCITS") authorized by the European Communities UCITS Regulations (the "Regulations"), (ii) it is constituted otherwise than under trust law or statute law, (iii) each of its units is beneficially owned by a pension fund or by a person other than an individual, or is held by a custodian or trustee for the benefit of a person other than an individual, and (iv) all the investors in the investment undertaking make a declaration on acquiring units in the undertaking. On this basis, the Fund will not be chargeable to Irish tax on its profits. The Fund will be an "umbrella fund" within the meaning of the Regulations. Accordingly the Fund will consist of several Sub-Funds and Units shall be issued in respect of each Sub-Fund. Each Unit will represent a proportionate undivided co-ownership interest in the property of the Sub-Fund. The Irish Custodian has safekeeping responsibilities, and the Canadian Sub-custodian has Canadian tax reporting responsibilities respecting Canadian source receipts.. The Manager will be responsible for managing the Fund's property in accordance with the Prospectus, Deed of Constitution, Regulations and any other regulatory requirements.
Rulings include
:
For the purposes of Part I…, each Unitholder will directly earn its proportionate share of income, losses, capital gains and capital losses from the property of the relevant Sub-Fund of which it is a Unitholder.
For the purposes of Part XIII…, any amount paid or credited by a Canadian payer to the Sub-custodian in respect of the property of a particular Sub-Fund will be an amount paid or credited to each Unitholder of the relevant Sub-Fund in proportion to the Unitholder's ownership of the property of the relevant Sub-Fund.
[T]he Dutch Treaty will apply to each Unitholder that is a resident of the Netherlands for the purposes of the Dutch Treaty for the purposes of determining the withholding rates in respect of the Canadian source income it earns from its share of the property of the relevant Sub-Fund.
28 April 2004 Internal T.I. 2004-0071191I7 F - À quoi se rattache l'élément contrôle/propriété?
Regarding whether the reference to a trust or an estate in s. 104(1) is equivalent to a reference to an heir without having ownership or control of the property of the estate, the Directorate stated:
The ownership or control test relates to each of the preceding elements (trustee, executor, administrator, liquidator, heir and legal representative) and not just to the legal representative. Consequently, a reference in the Act to a trust or estate is not a reference to an heir who does not have ownership or control of the property of the estate.
2006 Ruling 2004-0106101R3 - Class of German Arrangement & Treaty Benefits
Ruling that an open-end real estate fund established under the Investment Companies Act (Germany) (and to be continued under the Investment Act (Germany)) would be treated as an inter vivos trust that was not a personal trust for purposes of the Act in respect of its proposed investments in a Canadian partnership. The fund had a German manager and was required to have its real estate assets held by the manager and was deemed under the Investment Act to be an estate.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Treaties - Income Tax Conventions - Article 4 | 26 |
2004 Ruling 2004-0067771R3 - Irish Common Contractual Fund
Ruling that an Irish Common Contractual Fund would be considered to constitute a co-ownership arrangement.
20 May 2002 External T.I. 2002-0117885 F - Lien de dépendance et application de 120.4
CCRA indicated that a trust is related to an individual if its trustee is so related:
Subsection 104(1) provides in part that, for the purposes of the Act, a reference to a trust or estate, unless the context otherwise requires, includes a reference to the trustee, executor, administrator, etc., of the estate. Given that a trustee (whether an individual or a corporation) may be related to an individual for the purposes of subsection 251(2), it is therefore possible that a trust and an individual may be related for the purposes of the Act.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(a) | trustee is related to individual if its trustee is so related | 99 |
| Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income - Paragraph (c) | split income definition applied on the basis that the business of a partnership is carried on by its partners and that a trust if related based on the relatedness of its trustee | 311 |
18 February 2002 External T.I. 2000-0046075 - Trust Affiliated with a Corporation
The purpose of the amendment to s. 104(1) adding "unless the context otherwise requires" was not to make a fundamental change. Although a reference to "trust" generally refers to the term "trustee", the amendment recognizes that, in particular contexts, there are references to trust in the Act that are meant to indicate a trust arrangement, rather than the persons who are responsible for the operation of the arrangement
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(1) | 30 |
20 February 2002 External T.I. 2001-0105695 F - Remboursement d'impôt d'une fiducie liquidée
In finding that the potential tax refund resulting from the Quebec abatement to which a mutual fund trust was entitled should be paid to the trustee rather than the former unitholders where the trust had been wound up, CCRA stated.
Unlike a corporation, a trust does not constitute a legal person with legal personality. Consequently, the fact that a trust has been wound-up and its assets have been distributed will have no impact on any tax refunds owing to it after that time, which will continue to be paid to the trustee of the trust.
10 January 1996 External T.I. 9518515 - Transfers of property to revocable living trusts
Would a transfer of appreciated capital property to a revocable inter vivos trust (also referred to as a revocable living trust), which is not a disposition for U.S. purposes, be a disposition for purposes of the Act? CRA responded:.
Our understanding of a revocable living trust is that pursuant to the terms of the Declaration of Trust: (1) the settlor is the trustee and, during his or her lifetime, is the sole income and capital beneficiary, (2) the settlor retains the ability to revoke, alter or amend the terms of the trust at any time, (3) the settlor has the ability to deal with the property as he or she sees fit during his or her lifetime, and (4) at the time of the settlor's death, the income and capital interests in the trust vest in other beneficiaries. …
[B]y virtue of point (4) above, the settlor would not retain all incidents of beneficial ownership. Consequently, the transfer of property to such a trust would be a disposition of the property at its fair market value.
IT-216 "Corporation Holding Property as Agent for Shareholder"
- A corporation may hold in trust, as agent for a shareholder, property that was acquired specifically to be held in this way. This situation, however, will only be accepted as a fact where there is an agreement or declaration of trust, entered into before or at the time the property was acquired, between the corporation and the shareholder, which clearly sets out the intention of the parties to the agreement and the degree of participation of the shareholder in the property so held in trust..
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Agency | 0 | |
| Tax Topics - General Concepts - Effective Date | 89 |
Articles
Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114
Quaere whether beneficiary is beneficial owner (pp. 20:7-8)
Some commentators argue that a beneficiary of a trust is the beneficial owner of trust property, while others consider a beneficiary to have only a personal right to compel the trustee to administer a trust pursuant to the terms of the trust agreement. [fn 30: … (2003) Canadian Tax Journal 311-54 … 401-53]
[T]here will be a bare trust where the trustee—in all dealings relating to the trust property—has no discretion and is subject to the control of another person. [fn 36: See Peragine v. The Queen, 2012 TCC 348, at paragraph 18, where the court quotes De Mond Jr. v. The Queen, 1999 CanLII 466 (TCC), at paragraphs 37-38]
Elie Roth, Tim Youdan, Chris Anderson, Kim Brown, "Classification of Trusts for Income Tax Purposes", Chapter 2 of Canadian Taxation of Trusts (Canadian Tax Foundation), 2016.
Non-application to bare trusts (p. 86)
[T]he non-applicability of the Act to bare trusts has been recognized by the courts. [fn 107: …Brookview Investments Ltd… v. MNR, 63 DTC 1205 (Ex. Ct.): and De Mond v. The Queen, 99 DTC 893 (TCC).]…
Different settlor/multiple beneficiaries (p. 87)
In principle, there seems to be no reason why the beneficiary of a bare trust needs to be the settlor. There also seems to be no reason in principle why a bare trust cannot have more than one beneficiary. Moreover, it should be possible for beneficiaries to control their rights and obligations inter se by contract, without creating a trust for tax purposes.
Donald G.H. Bowman (former Chief Justice of the Tax Court of Canada), "Bare Trusts and Nominee Corporations", Tax Topics (Wolters Kluwer), August 11, 2016, No. 2313, p. 1
Trustee cannot also be an agent (p.4)
My reason for thinking that a trustee holding property or carrying on a business for a beneficiary cannot at the same time be an agent for a principal is based on the view that a trustee that holds property for a beneficiary cannot, as a matter of law, fulfill the obligation of a trustee under the law of trusts as it exists in the common law provinces of Canada or as contemplated by the Income Tax Act, and also as an agent with the power to bind the principal and to take steps that impose upon the principal contractual, legal, or tortious liabilities. The attributes and responsibilities of a trustee for a beneficiary and of an agent for the same person as a principal are irreconcilable. How then does one reconcile that proposition with what Webb J. said in the Peragine case? The short answer is that nowhere in his judgment does Webb J. suggest that the same person can wear both hats at the same time. Webb J. comes down on the side of agency only and does not consider that Salvatore Peragine is simultaneously a trustee.
Bare trustee is only an agent (p. 4)
My conclusions can be summarized as follows:
(a) A "bare trustee" is an agent, not a trustee.
(b) If a "bare trustee" has more of the attributes of a trustee than a mere passive holding of the property the relationship may be over the line from agent to trustee.
(c) No one can legally be a trustee and an agent at the same time. I do not think that Webb J. said that one could but in my opinion Morden J.A. in Trident Holdings Ltd. implied as much.
(d) Judges, when faced with something called a "bare trustee", have to make up their minds and decide which side of the line the entity falls on. They cannot schizophrenically shilly-shally between the two relationships or seek to avoid the admittedly difficult decision by saying "maybe both".
Jack Bernstein, "Trust Residence Question", Canadian Tax Highlights, Vol. 17, No. 7, July 2009, p. 1
Discussion of CRA audits of residence of inter-provincial trusts.