News of Note
GST/HST Severed Letters March 2025
Email this ContentThis morning's release of 13 severed letters from the Excise and GST/HST Rulings Directorate (identified by them as their March 2025 release) is now available for your viewing.
CRA indicates that a successor trust to a testamentary spousal trust does not have filing obligations until it is created, which can be after the date of death of the testator
A testamentary spousal trust provides that, after the death of the spouse, any remaining property will be held in one or more separate trusts for the benefit of the remainder beneficiaries. Is such successor trust (assuming it is not described in ss. 150(1.2)(a) to (r)) required to file a T3 return (including a Sched. 15 providing beneficial ownership information) while the surviving spouse is alive.
CRA indicated that once the successor trust was created, it would be obligated to annually file a T3 return because s. 150(1.2) would prevent it from being able to rely on the exception to filing contained in s. 150(1.1)(b) – and it also would not be exempted from the additional Reg. 204.2(1) reporting requirements, so that a Sched. 15 would be required.
As to when the successor trust arose, CRA generally viewed trusts created out of the residue of an estate as arising on the death of the individual. However, where the terms of a will provided that, on the death of the first-generation income and capital beneficiary (in this case, the spouse), the trustee was to divide the remaining property into equal parts to be held in a new trust for the interest of each child, such a trust or trusts would be viewed as being created at a later point in time than the testator's date of death.
CRA indicated that, in light of s. 104(5.8), the 21-year deemed disposition rule in s. 104(4) would apply to the successor trust when it would have applied to the testamentary spousal trust, i.e., 21 years after the death of the surviving spouse – rather, than 21 years after the date of formation of the successor trust, assuming that that occurred a number of months later.
Neal Armstrong. Summaries of 2 June 2026 STEP Roundtable, Q.2 under s. 150(1.2) and s. 104(5.8)(a).
CRA finds that subsequent bequests to a QDT will not disqualify it as such
We have uploaded the questions that were posed, and summaries of the preliminary oral responses given, at the 2 June 2026 STEP CRA Roundtable.
Q.1 related to the requirement in the definition of a qualified disability trust (QDT) that it be a testamentary trust that arose on and as a consequence of a particular individual's death.
Suppose that a QDT was established under the will of Parent A after her death, and when Parent B (the divorced ex-spouse of Parent A) subsequently dies, he bequeaths property to the same trust. CRA found that such a subsequent contribution would not disqualify the QDT.
First, the trust had already satisfied the requirement of having arisen as a consequence of a particular individual's death when it was formed pursuant to the will of Parent A. Second, given that the subsequent contribution occurred as a bequest, such contribution did not disqualify it as a testamentary trust, so that it continued to qualify as a QDT.
The same reasoning would apply if a subsequent bequest were made by a grandparent.
Neal Armstrong. Summary of 2 June 2026 STEP Roundtable, Q.1 under s. 122(3) - QDT.
Income Tax Severed Letters 3 June 2026
This morning's release of six severed letters from the Income Tax Rulings Directorate is now available for you viewing.
ICA approval of the Anglo American acquisition of Teck might require it to have central management and control in Canada
It is proposed that an indirect CBCA subsidiary (“ExchangeCo”) of Anglo American (a UK company) will acquire all the shares of Teck Resources in consideration for Anglo shares pursuant to a CBCA Plan of Arrangement. The Anglo shares will either be delivered by ExchangeCo directly to Teck shareholders or, in the case of resident Canadian who have validly so opted, it will issue Exchangeable Shares that are exchangeable for Anglo shares to them (with such holders being required to deliver any s. 85 election forms within 75 days of the Arrangement effective date). This Exchangeable Shares feature is unusual in that it is proposed that the Anglo shares into which the Exchangeable Shares would be exchangeable would be issued on the arrangement date to a Jersey holding company held by a special purpose trust, to be held there until the exchange right was exercised.
It may be unclear whether Teck would be an s. 212.3(10)(f) corporation. The steps seek to maximize the stated capital of the shares of "CallCo" (through which Anglo holds its ExchangeCo shares) issued to Anglo.
A special dividend in the amount of $4.5 billion, as adjusted to take into account any departures from the expected ordinary course dividends to be paid by Anglo American or Teck, will be paid in order to increase the relative market capitalization of Teck from 34% to 37.6%.
As announced in a December 15, 2025 press release, the conditions imposed under the Investment Canada Act for approving the merger included the following:
- Anglo Teck's global headquarters will be located in Canada.
- A significant majority of its senior management, including the CEO, Deputy CEO, and CFO as executive directors, will have their principal offices and reside primarily in Canada.
- A substantial proportion of Anglo Teck plc’s Board of Directors will be Canadian, comprising the Anglo Teck executive directors residing primarily in Canada and other Canadian members.
- Anglo Teck will maintain a TSX listing.
- Anglo Teck will invest at least Cdn.$4.5 billion in Canada within five years, including in connection with specified initiatives.
Note that the Canada-UK treaty (and MLI replacement rule) does not have an automatic tiebreaker rule for determining the residence of a UK company that has its central management and control in Canada – only a mutual agreement clause.
Teck shareholders that own more than 2% of the outstanding Teck shares could be subject to Peruvian tax at the rate of 30% on the proportion of any gain arising from the exchange of the Teck shares for Anglo shares or Exchangeable Shares that is attributable to the value of the shares of the underlying Peruvian entity, subject to any applicable Treaty exemption.
Neal Armstrong. Summary of Management Proxy Circular of Teck Resources Limited (“Teck”) respecting its acquisition by Anglo American plc (“Anglo American”), filed on November 11, 2025 and December 15, 2025 press release of Teck and Anglo American under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound – Exchangeable Share Acquisitions.
CRA provides no-disposition rulings respecting the squeeze-out merger of a Delaware limited partnership with a newly created Delaware LP with no assets
A Canadian-resident individual holds an interest in a Delaware limited partnership (USLP2) governed by the DRULPA directly and through a Canadian and Delaware limited partnership. In order to squeeze out minority partners with limited partnership interests in USLP2 of under 1% (the “de minimis partners”), a new subsidiary limited partnership (“New LP”) will be formed under the DRULPA which will be wholly owned by USLP2 directly and through an LLC general partner and which will have no assets.
USLP2 and New LP will then be merged under the DRULPA, with USLP2 designated as the survivor of the merger, and with the partnership interests of the de minimis partners cancelled on the merger in exchange for cash consideration. The ruling letter states that, under Delaware law, USLP2 will remain the same legal entity immediately following the merger as it was before the merger and that, under the limited partnership agreement, this transaction will not cause a dissolution of USLP2.
CRA ruled that the merger will not result in any disposition of any relevant partnership interests in USLP2 or a disposition of any of the assets of USLP2, other than its interest in New LP and its disposition of cash to the de minimis partners.
Neal Armstrong. Summary of 2023 Ruling 2022-0924531R3 under s. 248(1) – disposition.
We have translated 6 more CRA severed letters
We have translated a further CRA ruling released last week and 5 CRA interpretations released in April of 1999. Their descriptors and links appear below.
These are additions to our set of 3,580 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 27 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
CRA rules on a trust-to-trust transfer to permit indefeasible vesting before the 21st anniversary
CRA ruled on transactions under which a discretionary family trust, which is approaching the 21st anniversary of its settlement, transfers all its property for no consideration to a newly-settled trust with the same trustees and beneficiaries and virtually identical terms, except that the trustees now have the discretion to cause the interests in the trust to vest indefeasibly in one or more of the beneficiaries. Following such transfer, the trustees, by deed, cause all the interests to vest indefeasibly in one beneficiary (father).
CRA ruled respecting inter alia:
- the application of the no-disposition rule in para. (f) of “disposition” and of the trust continuity rule in s.104(25.1)
- the 21-year rule in s. 104(4) not applying provided that the declaration of indefeasible vesting occurs within 21 years of the settling of the first trust
- no loss restriction event regarding private corporations included in the trust corpus
Neal Armstrong. Summary of 2025 Ruling 2024-1036051R3 F under s. 108(1) – trust – (g).
CRA finds that a person can be a resident contributor based on deemed contributions made to a non-resident trust before 2007
CRA found that the post-2006 version of the s. 94 rules applied where a factually non-resident trust or its wholly owned subsidiary subscribed for shares of a resident corporation prior to 2007 with no election being made for an earlier application date. In this regard, CRA noted that the definition of "contributor" contemplated testing that status based on contributions made to a trust at any time before the testing time. Thus, the pre-2007 contribution would be by a “contributor” to the trust (unless an exempt person) - and such contributor, if also resident in Canada at the testing time, would generally be a "resident contributor" to the trust.
Furthermore, the deemed contribution rules in s. 94(2)(a) or (g), which reference their application “at any time” could also be triggered on the basis of deemed contributions occurring before the trust's 2007 taxation year.
CRA also confirmed that, by virtue of s. 4.3 of the Income Tax Conventions Interpretation Act, a trust which is deemed to be resident in Canada pursuant to s. 94(3) will be a resident of Canada and only of Canada for treaty purposes.
Neal Armstrong. Summaries of 24 March 2026 External T.I. 2025-1061181E5 under s. 94(1) - contributor and Income Tax Conventions Interpretation Act, s. 4.3.
CRA finds that the s. 37(1)(a)(i.01) deduction was not available to a company that did not control the research and had no right to the results
S. 37(1)(a)(i.01) provides a deduction for current SR&ED carried on in Canada that is related to the business of the taxpayer and that is directly undertaken “on behalf of” the taxpayer. CRA stated:
“[O]n behalf of” refers to a situation where SR&ED is contracted out by the taxpayer to another party (“the Performer”), the taxpayer exercises some direction or control or some other involvement in the SR&ED undertaken by the Performer and the taxpayer acquires or maintains rights to use the results of the SR&ED.
Accordingly, s. 37(1)(a)(i.01) was not available where the claimant administered an SR&ED program conducted for a pharmaceutical company at hospitals and universities but had no control over the research or right to use the results.
Neal Armstrong. Summary of 13 April 2026 Internal T.I. 2025-1082711I7 under s. 37(1)(a)(i.01).
Neal H. Armstrong editor and contributor