5 June 1996 External T.I. 9604755 - BENEFICIARIES OF MUTUAL FUND TRUST

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:

number of beneficiaries of mutual fund trust for purposes of Regulation 4801(b) where Insurance Company (segregated fund) holds units

Position:

there is no look through to each policyholder

Reasons:

Since each segregated fund is deemed a trust, eacj segregated fund would be a beneficiary

960475
XXXXXXXXXX Denise Dalphy
(613) 957-9231

Attention: XXXXXXXXXX

June 5, 1996

Dear Sirs:

Re: Paragraph 4801(b) of the Income Tax Regulations (the "Regulations")

This is in reply to your letter of January 29, 1996, wherein you requested our opinion on the application of the above-referenced paragraph of the Regulations.

It appears that the interpretation you seek relates to specific completed transactions and taxpayers. As such, it is appropriate that a determination as to whether the trust described in your aforementioned letter is a "mutual fund trust" be made by the relevant Tax Services Office. Nonetheless, we are prepared to offer the following comments.

Paragraph 4801(b) of the Regulations provides, inter alia, that units of the trust must be held by no fewer than 150 beneficiaries. Where a group RRSP is established and it "holds" the units of a "mutual fund trust", a separate trust may be established for each annuitant, or the employer or association creating the group RRSP must act as the agent of each annuitant, and the property held on behalf of the individual RRSPs must be identifiable for each individual plan. Accordingly, the Department has taken the position that, for the purposes of paragraph 4801(b) of the Regulations, the number of beneficiaries of the mutual fund trust will at least be equal to the number of annuitants of the group RRSP. A segregated fund is deemed to be a trust for the purposes of Part I of the Income Tax Act and is considered a separate person. Consequently, a segregated fund would be considered to be one investor in the mutual fund trust. Where an insurer has three segregated funds, since each segregated fund would be a deemed trust, we would consider there to be three investors in the mutual fund trust for the purposes of paragraph 4801(b) of the Regulations.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 21 of Information Circular 70-6R2, the above comments do not constitute an income tax ruling and accordingly are not binding on the Department. Our practise is to make this specific disclaimer in all instances in which we provide an opinion.

Yours truly,

for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch