Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
1. Whether there is a trust for purposes of subsection 75(2) of the Act.
2. If the answer to the first question is yes, whether subsection 75(2) would apply.
Position:
1. No position taken
2. In the circumstances described in the letter, paragraph 75(2)(b) would apply if a trust exists under the relevant laws of the province.
Reasons:
1. It depends on the relevant laws of the province and not the Act.
2. Question of fact
XXXXXXXXXX 2000-000516
Sylvie Labarre, CA
Attention: XXXXXXXXXX
March 9, 2000
Dear Sir\Madam:
Re: Subsection 75(2) of the Income Tax Act
We are writing in response to your facsimile of January 28, 2000 in which you requested a technical interpretation concerning subsection 75(2) of the Income Tax Act (the "Act").
You mention in your letter that the parents open trading accounts with a securities brokerage company on behalf of the minors. All funds deposited to the accounts were made by the parents, who have provided all instructions and made all investment decisions with respect to the accounts. The securities brokerage company and the parents intend to rectify the documents relating to the accounts to eliminate all uncertainty as to the nature of the accounts. The rectified documents will provide that the assets are the property of the minors, that the parents have complete authority to direct the manner of investment of the assets and that the assets may not be released until the minors reach the age of majority, and then only at the direction of the minors.
You have asked whether the expression "trust" as used in subsection 75(2) of the Act would include an account operated for minors by parents in accordance with the rectified documents and, if the answer is positive, whether subsection 75(2) of the Act would apply to that trust.
As explained in Information Circular 70-6R3, it is not the Canada Customs and Revenue Agency's practice to comment on proposed transactions other than in the form of an advance income tax ruling. Taxpayers seriously contemplating a proposed transaction are best advised to seek a formal ruling, submitting a complete statement of facts and issues as well as copies of all relevant documents. Should your situation involve completed transactions, you should submit all relevant facts and documentation to the appropriate tax services office for their views. We are therefore not in a position to give a definitive response to your enquiry. However, we can offer you the following general comments which may be of assistance although, in certain circumstances, they may not be appropriate to your specific situation.
Our view on the tax consequences would depend on whether or not a valid trust was created under the relevant laws of the province. Whether a trust exists is a question of fact and particular to the circumstances of each case. We do not provide opinions on whether or not a trust exists in a particular situation as it would require an interpretation of laws other than the Act.
The existence of a trust is determined by the relationship between the settlor, the trustees and the beneficiaries. The relationship may or may not be defined by a formal written document but is determined by any applicable trust legislation and common law. It is accepted at law that a trust cannot be established unless three certainties are present. That is, the attempt to establish a trust will fail unless it is certain that the settlor intended to bring a trust relationship into existence and both the property and the beneficiaries or other objects of the trust are described with sufficient certainty. Whether the three certainties are present or not is a question of fact and particular to the circumstances of each case, however, given the requirement of these three certainties, a written trust document would serve as the best evidence of their existence and would resolve any ambiguities which may otherwise arise. The certainty of intention is established where it is clear that a trust relationship was intended as opposed to some other relationship such as an agency. The property or property substituted therefor must be clearly identifiable in order for the certainty of property to exist. Lastly, to create a valid trust, the beneficiaries must be identifiable.
In a situation where no trust exists under the relevant laws of a province, we agree with your view that subsection 75(2) of the Act would not apply.
In the case of a trust relationship under the relevant laws of a province, and considering the particular rectified documents described in your letter, it is our view that paragraph 75(2)(b) of the Act would apply to the settlor as the property held by the trust could only be disposed of with the consent of, or in accordance with the direction of, the settlor of the trust.
If the new provisions related to tax on split income proposed in Bill C-25 are adopted as proposed, for the 2000 and subsequent taxation years, subsection 75(2) of the Act will not apply to any amount that is included in computing a specified individual's split income for a taxation year. Split income is defined in the definitions contained in subsection 120.4(1) of the Bill.
We are not commenting on any other matters that could be related to the situation described in your letter or on any other tax consequences that could apply to the situation.
We trust our comments will be of assistance to you. However, as indicated in paragraph 22 of Information Circular 70-6R3, this opinion is not a ruling and, accordingly, it is not binding on the Canada Customs and Revenue Agency.
We trust that these comments will be of assistance.
Yours truly,
Marc Vanasse, CA
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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