Cases
Olympia Trust Company v. Canada, 2015 FCA 279
Ryder JA affirmed a finding of Bocock J that a Canadian trust company, which was the trustee for self-directed RRSPs that had purchased shares from non-residents without withholding or receiving s. 116 certificates, was the "purchaser" for s. 116(5) purposes rather than the annuitants, i.e., it was on the hook as the shares were taxable Canadian property. Respecting an alternative argument that the purchasers for s. 116 purposes were the RRSP trusts themselves, he stated (at apra. 66):
[T]he critical element of subsection 116(5) is the paying or crediting of an amount to a Disposing Non-Resident as the purchase price or acquisition cost of the TCP… . This action cannot be taken by a fictional person.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 116 - Subsection 116(5) | RRSP trustee, not annuitant, was the "purchaser" | 200 |
| Tax Topics - General Concepts - Evidence | contract informed by surrounding circumstances | 59 |
Fraser v. The Queen, 91 DTC 5123 (FCTD), aff'd 95 DTC 5684 (FCA)
Approximately 100 taxpayers invested in a pool of mortgages by paying a subscription price for "units" to two companies, that used the proceeds to acquire mortgages and distributed the income and proceeds thereon from time to time to the unit holders. This was found to be a trust rather than an agency arrangement in light inter alia of the lack of any real control by the investors over the actions of the two trustee companies.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) | 60 |
Smith v. The Queen, 87 DTC 5355, [1987] 2 CTC 138 (FCTD)
Under a shareholder's agreement containing a right of first refusal, it was agreed that the shares held by the taxpayer would be sold in equal proportions to his three sons for $1.00. The shares of the taxpayer were not held in trust. "While the agreement may have reflected something of a common intent that the shares would pass to the sons in the event of the plaintiff's death, this did not clearly bespeak an intention to transfer or vest the beneficial ownership of those shares in the three sons." Furthermore, the taxpayer "acted at all times as though he were the beneficial owner of the shares."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 173 - Subsection 173(1) | 88 |
Drescher v. The Queen, 85 DTC 5064, [1985] 1CTC 229 (FCTD)
It was found that family members each bought lottery tickets on the understanding that gains would be shared among them. It accordingly was held that the taxpayer purchased a lottery ticket and invested the $1 million prize in term deposits as trustee, and that interest income earned on the monies so invested was earned equally by the three family members.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Provincial Law | 52 |
Bouchard v. The Queen, 83 DTC 5193, [1983] CTC 173 (FCTD)
It was found that real property, which had been purchased by the plaintiff and his wife, had been held by them in trust over a 13-year period for their son and daughter-in-law, notwithstanding S.9 of the Statute of Frauds (Ontario) and the absence of any writing supporting the existence of the trust other than a purported agreement of purchase and sale between the two generations which had been executed 8 years after the settling of the trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Effective Date | parol trust over land has effect for tax purposes from its formation - at least, if subsequently confirmed in writing | 160 |
| Tax Topics - General Concepts - Evidence | 74 | |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(e) | 70 | |
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) | 83 |
Atinco Paper Products Ltd. v. The Queen, 78 DTC 6387, [1978] CTC 566 (FCA)
Gifts were made by the supposed settlor of a trust to her nephews absolutely unencumbered by any limitation on them other than an expressed hope that the ultimate benefit of the gifts would accrue to the benefit of the wives and children of the nephews. The gifts accordingly did not settle a trust nor could a later trust agreement be construed as a valid declaration of trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Evidence | 18 | |
| Tax Topics - General Concepts - Tax Avoidance | 58 |
Ablan Leon (1964) Ltd. v. MNR, 76 DTC 6280, [1976] CTC 506 (FCA)
Trusts were not formed when a series of cheques were sent by the supposed settlor to another individual. "From the point of view of the settlor, and it is his point of view that is significant, the transaction, up to and including the mailing of the cheques, remained indefinite, too indefinite to constitute the trusts." When trust deeds were executed over 6 months later, the trusts still were not established since the supposed settlor instead was a nominee.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Nature of Income | 105 | |
| Tax Topics - Income Tax Act - Section 96 | 31 | |
| Tax Topics - Statutory Interpretation - Provincial Law | 101 |
The Queen v. Esskay Farms Ltd., 76 DTC 6010, [1976] CTC 24 (FCTD)
The taxpayer, in order to defer pursuant to s. 20(1)(n) the recognition of gain on the sale of land to the City of Calgary, agreed to sell the land to a trust company for cash consideration payable in eight years time. The trust company contemporaneously sold the land to the City for close to immediate consideration. The obligations of the trust company under the purchase agreement with the taxpayer were conditional upon the sale to the City occurring, and registered title was transferred directly from the taxpayer to the City.
The relationship of trustee and cestui qua trust did not exist between the trust company and the taxpayer "because the Trust Company received the proceeds for the sale and used these proceeds for its own benefit which is not consistent with acting as trustee for the defendant".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Agency | weight given to written agreement terms in finding that intermediary purchased as principal | 122 |
| Tax Topics - General Concepts - Evidence | 81 | |
| Tax Topics - General Concepts - Sham | no sham if documents describe intended legal rights | 354 |
| Tax Topics - General Concepts - Tax Avoidance | no sham if documents describe intended legal rights | 354 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) | 199 | |
| Tax Topics - Income Tax Act - Section 245 - Old | 57 | |
| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) | 195 | |
| Tax Topics - Statutory Interpretation - Provincial Law | 58 |
Kingsdale Securities Co. Ltd. v. The Queen, 74 DTC 6674, [1975] CTC 10 (FCA)
An alleged settlement of trusts (prior to the date of execution of the trust deeds) did not occur due to the lack of the requisite certainty of intention on the part of the settlors.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Effective Date | 52 | |
| Tax Topics - Income Tax Act - Section 169 | 84 | |
| Tax Topics - Income Tax Act - Section 172 - Subsection 172(2) | 84 | |
| Tax Topics - Income Tax Act - Section 96 | 19 |
Settled Estates Ltd. v. Minister of National Revenue, 60 DTC 1128, [1960] CTC 173, [1960] S.C.R. 606
The combined presumption in ss. 104(1) and (2) that executors are deemed to be individuals for purposes of taxation of the estate did not apply for purposes of the definition of "personal corporation" in the pre-1972 Act, because that definition only contemplated individuals who were members of a family.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Individual | 111 | |
| Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 15(2) | contrary intention present | 51 |
See Also
Goldman v. The Queen, 2021 TCC 13
The taxpayer was designated as the beneficiary of her mother’s RRSP, but was orally told by her mother that this was occurring on the condition that she was to use those proceeds to pay various bills and estate-related expenses and divide the remainder equally with her two sisters.
Graham J found that, on this basis, the taxpayer had received the net proceeds of the RRSP under a trust. This trust was a separate person from its trustee (the taxpayer), so that such transfer gave rise to a s. 160(1) liability only to that trust rather than to the taxpayer. In this regard, he stated (at paras. 47-49):
Subsection 104(2) … deems a trust to be an individual in respect of the trust property … .
Thus, a tax debt owed by a trust is a debt of the trust itself … [and] is not a personal debt of the trustee. While subsection 104(1) imposes on the trustee the obligation to use the trust’s assets to pay that debt, it does not impose the debt itself on the trustee personally.
... [A]bsent a subsection 159(3) assessment, a trustee has no personal exposure in respect of a trust’s tax debts simply by virtue of being a trustee.
| 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 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 |
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(1) | oral instructions, before her death, by mother to daughter re application of the proceeds of her RRSP gave rise to a trust | 208 |
Evoy Estate v. The Queen, 2016 TCC 263
The will of a Canadian-resident individual established three separate testamentary trusts for each of his three children and their respective children (his grandchildren), but with his surviving wife (Pauline) being the income beneficiary of each trust for her lifetime. The Minister reassessed to add the income of the two other trusts to that of the appellant trust for three successive years, pursuant to a s. 104(2) designation of the three trusts as one trust. The taxpayer maintained that the three trusts could not be so designated, as they did not have common income beneficiaries after Pauline’s death.
Paris J agreed. In rejecting the Crown’s argument that the test in s. 104(2)(b) (of the multiple trusts being “conditioned so that the income thereof accrues or will ultimately accrue to the same beneficiary or group or class of beneficiaries”) must be applied on an annual basis, he stated (at paras 14, 15, 16 and 21):
…[T]he text of paragraph 104(2)(b) appears to contemplate a consideration of the right to receive the income of the trust over the entire lifetime of the trust rather than for each taxation year. The inclusion of the wording “or will ultimately accrue” supports this conclusion. …
… [T]here is no power given to the Minister to re-designate a consolidated trust as multiple trusts in the event that the conditions set out in paragraph 104(2)(b) are no longer met in a subsequent taxation year, nor is any process for applying for a re-designation provided. …
… Had the purpose of the provision been to create an annual test, one would expect to find some indication that the designation would be done annually, or that it could be revoked at some future point.
Paris J concluded (at para 24):
… [T]he entire class of children and grandchildren are not income beneficiaries of each trust. Rather, a different part of the class is named in each of the trusts. … Therefore the trusts are not conditioned so that the income will ultimately accrue to the same group or class of beneficiaries.
Howard v. Commissioner of Taxation, [2014] HCA 21
The taxpayer and four others formed a joint venture to acquire, lease and sell a golf course. The taxpayer attempted to have a corporation of which he and two other of the participants were directors ("Disctronics") acquire the property. The other two joint venture participants (the "non-directors"), rather than agreeing, secretly acquired the gold course for their own account and sold it at a profit.
The taxpayer and the other two directors obtained a damages award against the non-directors for breach of their fiduciary duties to the three directors qua joint venture participants.
The taxpayer was assessed to include his share of the award in his income notwithstanding that Distronics had received that amount and included it in its income. The High Court first held that the taxpayer had not received the award by reason of his position of director (as Disctronics never was admitted to the joint venture) and that no conflict had arisen between his personal interests and those of Disctronics. Accordingly, he had not become entitled to the amount as constructive trustee for Disctronics, and it was income to him.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(4) | agreement assigned rights to proceeds of law suit rather than entitlement under law suit | 344 |
| Tax Topics - Income Tax Act - Section 9 - Compensation Payments | damages not corporate income as not received qua director | 191 |
| Tax Topics - Income Tax Act - Section 9 - Nature of Income | agreement assigned rights to proceeds of law suit rather than entitlement under law suit | 344 |
De Mond v. R., 99 DTC 893, [1999] 4 CTC 2007 (TCC)
A trust established by the taxpayer (apparently intended to be a revocable living trust for US tax purposes) was found to be a bare trust. After referring inter alia to the definition of Professor Waters of a "bare trust" as "a trust where the trustee or trustees hold property without any further duty to perform except to convey it to the beneficiary or beneficiaries upon demand," as well as to the narrower definition provided by Revenue Canada in Income Tax Technical News No. 7, Lamarre J noted that the taxpayer could cause the trust property to revert to him at any time, could exercise his power to revoke the trust whenever he wanted to, the trustee had no choice but to convey the property to him upon demand and in light of the fact that he was the settlor, the trustee and the beneficiary. Accordingly, losses arising from the trust property (a partnership interest) could be treated by him as personal deductions.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 104 - Subsection 104(1) | taxpayer characterized as playing the role of settlor, trustee and beneficiary of his “own” trust, so that it was a bare trust | 412 |
Stricker Oolup v. The Queen, 2003 DTC 2142, 2003 TCC 947 (Informal Procedure)
The taxpayer was able to rebut the presumption of resulting trust in favour of the estate when her grandmother, who with the taxpayer had been the joint holder of a guaranteed investment certificate, passed away. Accordingly, the portion of the GIC that she chose to retain rather than gift to beneficiaries of the estate was characterized as her property, rather than as a fee earned by her from the estate.
Collins v. The Queen, 96 DTC 1034 (TCC)
Before rejecting a submission that the taxpayer held half of his shares of a private company on a constructive or resulting trust for his wife, Bowman TCJ. in order that the taxpayers had adopted a complex and sophisticated corporate structure for holding their various business interests and (at p. 1039):
"Both he and his wife are too intelligent to be oblivious to the fact that each owned different portions of the corporate empire and that they did so for good reasons."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Ownership | ownership means beneficial ownership | 27 |
| Tax Topics - General Concepts - Substance | 108 |
Karavos v. The Queen, 95 DTC 1001 (TCC)
Before finding that, in any event, the taxpayer had failed to establish that one-half of his interest in a building was held on a constructive trust in favour of his wife, Sarchuk TCJ. found (at p. 1006) that "a constructive trust is a mechanism by virtue of which a court with equitable jurisdiction can grant redress to an unjustly deprived person", and that it was not appropriate for the Tax Court to dismiss or allow an appeal, or vacate or vary an assessment, on the basis of a finding by it that there was a constructive trust:
"Effectively a court is required to embark on an examination of the totality of a marital relationship extending over a period of 30 years to determine whether an unjust enrichment occurred and whether it would be appropriately remedied by a declaratory order vesting the claimant with title to property or by granting a monetary award. In my view such an inquiry is inappropriate in an income tax context."
Gillis v. MNR, 91 DTC 1457, [1991] 2 CTC 2708 (TCC)
The presumption under common law and s. 21 of the Matrimonial Property Act (Nova Scotia) of resulting trust with respect to a transfer of property by the taxpayer to his wife was rebutted by evidence that such transfer was motivated by a desire to place the property beyond the legal reach of potential creditors of the taxpayer.
Nelson v. MNR, 91 DTC 37 (TCC)
Insufficient evidence was advanced to support the taxpayers' position that 1/2 of a farm was held on a constructive trust.
Fraser v. MNR, 89 DTC 620 (TCC)
A vehicle under which a company ("Marlowe-Yeoman") invested in and held mortgages on behalf of investors, who had the right to redeem their "units" in the "syndicate" was found to establish a trust relationship rather than a co-ownership arrangement. There was "the duality of property ownership which is characteristic of trust", and Marlowe-Yeoman held the mortgages as a fiduciary. The lack of control of the unit holders over the mortgages, and the right to withdraw without the consent of the other unit holders, was inconsistent with co-ownership.
Zeidler v. Campbell (1988), 29 E.T.R. 113 (Alta. Q.B.)
A voting trust agreement did not give rise to a trust in light inter alia of the fact that the alleged trustee did not acquire any property in the shares and was free to profit from the shares.
Bank of Nova Scotia v. Societé General (Canada), [1988] 4 WWR 232 (Alta. C.A.)
An operator under the 1981 Canadian Association of Petroleum Landmen Operating Procedure held funds received from the non-operators in trust given the aspects of the agreement suggesting a fiduciary relationship including the prohibition on the operator using excess funds and revenues for its own use, and notwithstanding the permission accorded to the operator to commingle its own funds with those of the non-operators.
Miconi v. MNR, 85 DTC 696, [1985] 2 CTC 2457 (TCC)
A real estate property was found to be beneficially owned by the taxpayer rather than by a corporation controlled by him, with the result that amounts paid by the corporation in respect of the property constituted loans made to him that were subject to s. 15(2). In rejecting a submission that the property was held by the individual under a parol trust in favour of the corporation, Rip TCJ. found that although this claim was supported by probability and by convincing parol evidence, it was not supported by writing, indisputable facts and disinterested testimony.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(2) | 95 |
Administrative Policy
29 November 2022 CTF Roundtable Q. 9, 2022-0950531C6 - Multiple Wills and T3 Reporting
An individual has two wills, only one of which is subject to probate. The two wills are administered separately, perhaps with different executors. 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 ss. 248(1) and 104(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(1) | there is only one estate (and one T3 return) for a deceased, even if there are multiple wills | 111 |
26 April 2013 External T.I. 2013-0486211E5 - Multiple Trusts
CRA provided general comments respecting several situations where there are several testamentary trusts set up such that the spouse of a deceased taxpayer is the principal beneficiary of the trust property and each child is a residual beneficiary of one of the trusts, and stated:
For the purposes of determining whether the discretion in subsection 104(2) of the Act would be exercised, certain criteria are examined, including but not limited to:
- whether there was a clear intention to create separate trusts, according to the provisions of the will or trust deed;
- whether the trusts have common beneficiaries, in particular the number of common beneficiaries and the nature of their respective interests in each of the trusts;
- whether the assets of each of the trusts are administered and accounted for separately; and the powers of the trustees.
28 December 2011 External T.I. 2011-0430261E5 - Subsection 104(2) of the Act
where a taxpayer dies leaving his property equally to three testamentary trusts of which his surviving spouse is the only capital and income beneficiary during her life and, upon her death, each of the three children is a respective beneficiary, the Minister likely would designate them as a single trust. The Directorate noted that "it is not necessary that each trust have the same beneficiaries; it is sufficient that the beneficiaries of each trust are of the same group or class of beneficiaries."
5 March 2010 Internal T.I. 2009-0346261I7 F - Minimisation des pertes
Before concluding that a testamentary trust can qualify as an estate beneficiary for s. 112(3.2)(b) purposes, the Directorate stated:
[A]lthough under civil law a trust does not in itself constitute a separate legal entity, Parliament has chosen, for the purposes of applying the Act, to disregard these legal effects and instead treat the trust as a separate tax entity with ownership of the property it holds. In addition, subsection 104(1) provides, inter alia, that, for the purposes of the Act, and unless the context otherwise requires, a reference to a trust or estate is to be read to include a reference to the trustee, executor, administrator, liquidator of a succession, heir or other legal representative having ownership or control of the trust property.
The combined application of subsections (1) and (2) of section 104 means that, for the purposes of the Act, both the trust and the trustee(s) (or executor(s)) of the trust may be considered to be an individual in respect of the trust property and thus to own or control the trust property, regardless of the applicable private law. The definition "beneficiary" in subsection 108(1) defines beneficiaries of a trust to include persons beneficially interested in the trust. The Act does not otherwise define "beneficiary". Therefore, for any concept not otherwise defined in the Act, including those in subsection 248(25), recourse must be had to the provisions of the CCQ dealing, for the purposes hereof, with estates constituted in Quebec.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2) - Paragraph 112(3.2)(b) | a testamentary trust can qualify as an estate beneficiary for s. 112(3.2)(b) purposes | 208 |
| Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2) - Paragraph 112(3.2)(a) | respective purviews of ss. 112(3.2)(a)(ii)(A), (B) or (C) | 118 |
13 June 2007 External T.I. 2006-0178031E5 F - Biens détenus par des fiducies testamentaires
The will of Mr. A provides for transfers to three testamentary trusts(C-1, D-1 and E-1) for each of his three children and their children, and also for a contribution to a spousal trust, whose terms provide that upon the death of the spouse (Ms. B), the residue of the spousal trust will be divided among three testamentary trust s (C-2, D-2 and E-2) with the same respective beneficiaries as the first three trusts (C-1, D-1 and E-1). Regarding whether s. 104(2) could be applied to consolidate the six testamentary trusts into three, should it be considered that the assets come from two different people, Mr. A and the spousal trust? CRA responded:
We are of the view that a trust referred to in subsection 248(9.1) would be considered to be a trust that arose on and as a consequence of the death of the individual even though that trust (for example, any of the C-2, D-2 and E-2 testamentary family trusts) does not receive the property until a specific future date such as, for example, the death of the surviving spouse, or even though it is not legally created at the date of the individual's death. …
[A]ssuming that all the property transmitted to the various trusts comes from the testator, Mr. A, we are of the view that the property that the spousal trust would transfer to the testamentary family trusts C-2, D-2 and E-2 upon Ms. B's death would originate from Mr. A. Consequently, the condition set out in paragraph 104(2)(a) would be satisfied.
7 October 1999 APFF Roundtable Q. 8, 9920960 F - CATÉGORIE DE BÉNÉFICIAIRES
How does Revenue Canada interpret the expression "class of beneficiaries"? For instance, would members of the same family be considered the same class of beneficiaries?
CCRA indicated that, for purposes of making a determination under s. 104(2), the criteria examined include:
- Whether it is clear that the settlor intended to create separate trusts under the provisions of the will or trust deed.
- Whether the trusts have common beneficiaries.
- Whether the assets of each trust are administered and accounted for separately.
- The powers of the trustees.
The expression "class of beneficiaries" would be interpreted in accordance with its ordinary meaning. "Class" is defined in Webster's as "a group, set, or kind sharing common attributes" and in the Oxford dictionary as "a group of persons or things having some characteristics in common."
Members of the same family would be considered to be one class of beneficiaries.
23 February 1999 External T.I. 9809755 - IN-TRUST ACCOUNTS
Where "in-trust accounts" are set up by parents for holding mutual fund investments on behalf of their minor children, the certainty of intention to establish a trust arrangement will be difficult to establish in the absence of a formal trust document.
19 February 1999 Internal T.I. 9831647 - LAWYER'S TRUST ACCOUNT
Discussion of background to the position in IT-129R, para. 10, respecting the deposit of funds with lawyers pending the outcome of litigation.
22 September 1997 External T.I. 9717475 - IN-TRUST ACCOUNTS
Where an "in trust" account is set up to hold a mutual fund investment on behalf of children, the certainty of intention to set up a trust arrangement would be difficult to prove in the absence of a formal trust document.
Income Tax Technical News, No. 7, 21 February 1996 (cancelled)
Where property is held by a bare trust, RC will ignore the trust for income tax purposes and will consider the transferor/settlor to be the owner of the property for purposes of the Act.
8 March 1995 External T.I. 9433255 - CURTESY ELECTION - WHETHER A TRUST
A courtesy interest in a deceased married woman's estate that the surviving widower elects to receive, is not a trust but, rather, an interest in land.
18 February 1994 External T.I. 9334285 F - Bare Trusts
Where a settlor transfers property to a trust having the characteristics according with RC's understanding of a bare trust (the settlor is the sole beneficiary of income and capital during her lifetime, she retains the ability to revoke or amend the trust at any time and has the unfettered ability to deal with the property as she sees fit during her lifetime) but the settlor also stipulates that income and/or capital interest of other beneficiaries, which are contingent during her lifetime, will vest upon her death, the trust will be considered to be a bare trust until her death. Accordingly, she will report all income and losses related to the property and (subject to the availability of any rollover) will have a deemed disposition at fair market value of the property on her death.
24 February 1993 T.I. (Tax Window, No. 29, p. 14, ¶2439)
The Crown can be constituted a trustee only by the express provisions of an Act of Parliament. Where the Crown is a trustee, the trustee will not be taxable by virtue of Crown immunity.
31 March 1993 T.I. (Tax Window, No. 29, p. 8, ¶2444)
A trust that is a grantor trust for U.S. purposes will be treated as a bare trust for Canadian purposes, with the result that the settlor will be considered to be the owner of the property for purposes of the Act.
25 January 1993 Memorandum (Tax Window, No. 28, p. 22, ¶2398)
Two trusts need not operate concurrently nor need the trustees be the same for a designation under s. 104(2) to be made. Any such designation is applicable only in respect of income rather than losses incurred by the trusts. S.104(2) is considered to be an anti-avoidance measure.
October 1992 Central Region Rulings Directorate Tax Seminar, Q.Q (May 1993 Access Letter, p. 234)
In order for a bare trust to exist for purposes of the Act, the declaration of trust must have been entered into at the time the property in question was acquired by the corporation and the corporation should not be empowered to perform any active duties with respect to the property other than those directly related to the business reasons for there being a bare trust.
23 January 1992 T.I. (Tax Window, No. 16, p. 21, ¶1712)
A trust under which the trustee does not have any significant powers or responsibilities and does not take any action regarding the trust property without instructions from the settlor, and the settlor is the sole beneficiary, would be ignored for income tax purposes.
18 November 1991 Memorandum (Tax Window, No. 11, p. 6, ¶1536)
If a trust is used to achieve a beneficial result for tax purposes not otherwise available to the settlor, this usually is an indication that the trust should be regarded as a valid trust and not as an agent or a bare trust.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 102 - Subsection 102(1) | 36 |
10 May 1990 T.I. (October 1990 Access Letter, ¶1471)
Where the parties to an arrangement intend to create a trust for tax purposes and the custodian of the property acts as a trustee under an agreement giving him the usual rights and obligations of a trustee, the fact that the arrangement would not be a trust under the civil law would not preclude it from being treated as a trust for tax purposes.
27 October 89 Memorandum (March 1990 Access Letter, ¶1147)
No provision of the Act allows a usufruct to be treated as a trust.
89 C.M.TC - "Bare Trusts"
general discussion
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | 45 |
88 C.R. - Q.31
A constructive trust is subject to the trust provisions of the Act.
88 C.R. - Q.32
Where a bare trust exists at common law, ss.104(1) and (2) will apply because the transferor transfers the legal title while retaining the beneficial ownership.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) | 24 |
80 C.R. - Q.12
A minor cannot hold shares in a corporation and, in an estate freezing context, where a trust is used to hold shares for a minor, then it is required that either no dividends be paid until the minor is 18, or no preferred beneficiary election be made and no amounts paid or payable to or for the benefit of the beneficiary.
79 C.R. - Q.24
RC usually considers settlor/beneficiary as the actual owner of the property in a bare trust, except that s. 104(1) or (2) is applied for the purpose of requiring a T3 return.
A blind trust is not a bare trust.
IT-129R "Lawyers' Trust Accounts and Disbursements"
Where funds are deposited with a lawyer by litigants for safekeeping and investment pending a court order or settlement, the income generated is regarded as income of the trust and the beneficial owner of the income will be considered to be the eventual recipient of the funds.
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.
Purpose of s. 104(2) (pp. 246-7)
Lloyd F. Raphael has stated that the "apparent purpose of [subsection 104(2)] is to prevent a settlor from splitting potential income of a trust for a beneficiary by the creation of several trusts, each with smaller incomes, for the same beneficiary. [F.n.420 – Lloyd F. Raphael, Canadian Income Taxation of Trusts, 3d ed. (Toronto: CCH Canadian, 1993), at 267.] He has also stated that the power to consolidate trusts under subsection 104(2) was introduced into the Act because of the reasoning of the courts in Holden v. Minister of National Revenue. [F.n.421 – (1933), 1 DTC 243 (PC). ] … The Privy Council concluded that on a true construction of the will there were three distinct trusts, which should be assessed and taxed separately.
Potential retroactive effect (p 247)
The designation under subsection 104(2) is clearly effective once the designation is made, but it is not clear whether the subsection permits the minister to make the designation effective for the time before the designation was made. It has been suggested that the designation may be effective for the earlier period. In commenting on the Mitchell case [56 DTC 521], Lloyd F. Raphael has stated that "if the original trust property received by the trusts from the settlor is substituted for other property, whether by sale or exchange, it would appear that the Minister could make the designation after the substitution or that the designation could be made retroactively to the date of the creation of the trusts, seeing that the wording of the subsection is not limited to the trusts' incomes of any year." [F.n. 424 …Supra note 420, at 270.] This statement was noted by the CRA in a technical interpretation…. [F.n.425 … 9238787.]
Treatment of losses (p. 248)
The designation under subsection 104(2) deems the property of all the trusts to be the property of the designated single trust, and the income of all the trusts to be the income of the designated single trust. It is not clear whether the word "income," as used in this context, should also include loss. The inclusion of loss may be consistent with the underlying concepts of treating all trusts as if they were one trust. However, the CRA has suggested that subsection 104(2) should not be used to consolidate the income of one trust with the loss of another trust. [F.n. 426 Ibid.]
Keith R. Hennel, "Escrow Arrangements in Acquisition Agreements: What Are You Creating?", CCH Tax Topics, No. 2176, November 21, 2013, p. 1
Whether an escrow arrangement represents a trust (p. 2)
As indicated by other commentators, poorly drafted escrow arrangements have resulted in the income earned in the escrow account being taxable as if the escrow arrangement were in fact a trust. [fn 9: Daniel Lang and Charles Taylor, "Tax Issues in Purchase and Sale Agreements", Report of Proceedings of the Sixty-Third Tax Conference, 2011 Tax Conference (Toronto: Canadian Tax Foundation, 2012), 1-52. See also E.G. Kroft, "Tax Clauses in Acquisition Agreements" in Selected Income Tax and Goods and Services Tax Aspects of the Purchase and Sale of a Business, 1990 Corporate Management Tax Conference (Toronto: Canadian Tax Foundation, 1991), 9:1-99] Whether an escrow arrangement creates a trust will depend on all the facts and circumstances, including the terms of the arrangement. It is interesting that, with respect to interest earned on funds deposited with a lawyer by a litigant or litigants for safekeeping and investment, pending a court or settlement establishing its proper disposition, the Canada Revenue Agency ("CRA") considers such income to be income of a trust and recognizes that the beneficial owner is the eventual recipient of the funds. [fn 10: IT-129R, "Lawyers' trust accounts and disbursements", November 7, 1986 at para. 10. Note that in IT-129, at para. 10, the CRA states: "[C]onditional upon waivers being filed by each of the litigants and the lawyer-trustee for the relevant taxation years, the Department will defer assessment of the income until the recipient is finally determined". See also CRA Document No. 9831647, Lawyer's trust account, February 19, 1999, and CRA Document No. 2007-0233761C6, 2007 Step Conference – Question 1 – In-trust accounts.