9 June 2004 External T.I. 2004-0070381E5 - Amateur Athlete Trusts

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.

Principal Issues: Whether section 143.1 of the Act would apply where rules of International Sport Federations ("ISF") requiring amounts to be held, controlled and administered by a National Sport Organization ("NSO") that is a registered Canadian amateur athletic association ("RCAAA") in order to preserve the eligibility of the athletes to compete in a sporting event sanctioned by an ISF (the "Eligibility Rule"), are removed.

Position: Based on the current wording of subsection 143.1(1)(a), if an ISF does not have an Eligibility Rule, the receipt by a RCAAA of an amount for the benefit of an athlete will not result in the creation of an Amateur Athlete Trust for tax purposes. In other words, in the absence of an Eligibility Rule, it will not be possible to create new Amateur Athlete Trusts. An existing Amateur Athletic Trust (i.e. a trust deemed to have been created under subsection 143.1(1)(a) on the receipt of an amount by a RCAAA at a time where an Eligibility Rule existed) will not cease to exist by reason of the removal of the Eligibility Rule. However, it will not be possible to make further contributions to existing Amateur Athlete Trusts. In other words, section 143.1 will not be applicable to amounts received by a RCAAA for the benefit of an athlete after the removal of an Eligibility Rule. In that regard, paragraph 168(1)(f) provides that where a RCAAA accepts a gift or donation the granting of which was expressly or impliedly conditional on the association making a gift or donation to another person, club, society or association, the Minister may, by registered mail, give notice to the RCAAA that the Minister proposes to revoke its registration.

Reasons: Wording of the Act.

	2004-007038
XXXXXXXXXX 	S. Prud'Homme	(613) 957-8975
June 9, 2004

Dear XXXXXXXXXX:

Re: Technical Interpretation Request - Amateur Athlete Trusts

This is in reply to your letter dated March 12, 2004 in which you requested our views on certain issues, most of which are related to inter vivos trusts ("Amateur Athlete Trusts") deemed to be created under subsection 143.1(1) of the Income Tax Act (the "Act"). We apologize for the delay in responding to your query.

Unless otherwise stated, every reference herein to a section, subsection or paragraph is a reference to the relevant provision of the Act.

1) Comments with respect to the Legal Opinion

In your letter, you requested our views on the main points raised in the legal opinion dated November 18, 2003 issued by XXXXXXXXXX and addressed to XXXXXXXXXX (the "Legal Opinion").

We understand that, in the past, the rules of International Sport Federations ("ISF") required amounts to be held, controlled and administered by a National Sport Organization ("NSO") in order to preserve the eligibility of the athletes to compete in a sporting event sanctioned by an ISF (the "Eligibility Rule").

We also understand that, over the past few years, most ISFs have removed the Eligibility Rule, or are contemplating to do so. The result is that, for many sports, there is no longer an ISF rule requiring funds received by or for the benefit of an athlete to be held, controlled and administered by the relevant NSO.

We generally agree with the conclusions reached in part III. 1. " Application of Section 143.1" of the Legal Opinion.

Paragraph 143.1(1)(a) provides that where a NSO that is a registered Canadian amateur athletic association ("RCAAA") receives an amount for the benefit of an individual under an arrangement made under rules of an ISF that require amounts to be held, controlled and administered by the NSO in order to preserve the eligibility of the individual to compete in a sporting event sanctioned by the federation, an inter vivos trust (an Amateur Athlete Trust) is deemed to be created on the day that is the later of the day on which the first such amount is received by the NSO, and January 1, 1992, and to exist continuously thereafter until subsection 143.1(3) or (4) applies in respect of the trust.

Based on the current wording of subsection 143.1(1)(a), we are of the view that if an ISF does not have an Eligibility Rule, the receipt by a RCAAA of an amount for the benefit of an athlete will not result in the creation of an Amateur Athlete Trust for tax purposes. In other words, in the absence of an Eligibility Rule, it will not be possible to create new Amateur Athlete Trusts.

We are also of the view that an existing Amateur Athletic Trust (i.e. a trust deemed to have been created under subsection 143.1(1)(a) on the receipt of an amount by a RCAAA at a time where an Eligibility Rule existed) will not cease to exist by reason of the removal of the Eligibility Rule. However, we are of the view that it will not be possible to make further contributions to existing Amateur Athlete Trusts. In other words, section 143.1 will not be applicable to amounts received by a RCAAA for the benefit of an athlete after the removal of an Eligibility Rule.

2) Other Issues

In your letter, you referred to the fact that a NSO may receive donations on behalf of a National Team athlete. In that regard, we would like to bring your attention to paragraph 168(1)(f) which provides that where a RCAAA accepts a gift or donation the granting of which was expressly or impliedly conditional on the association making a gift or donation to another person, club, society or association, the Minister may, by registered mail, give notice to the RCAAA that the Minister proposes to revoke its registration.

Finally, a part of the Legal Opinion deals with the opportunity of making submissions to the Government with respect to the amendment of section 143.1. On that point, please note that the role of the Canada Revenue Agency is to administer and enforce the Act as passed by Parliament. Tax policy and amendments to the Act are the responsibility of the Department of Finance. Should you wish to pursue this concern further, you may contact the Tax Policy Branch of the Department of Finance by writing to L'Esplanade Laurier, 17th Floor, East Tower, 140 O'Connor Street, Ottawa ON, K1A 0G5.

We trust that our comments will be of assistance. However, as stated in paragraph 22 of Information Circular 70-6R5, the opinion expressed in this letter is not a ruling and consequently is not binding on the Canada Revenue Agency.

Yours truly,

Stéphane Prud'Homme, LL.B. M.Fisc.

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch