28 June 2024 External T.I. 2023-1000081E5 - Paragraph 150(1.2)(b) and GICs

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 Guaranteed Investment Certificates (“GICs”) issued by a Canadian bank or trust company are assets listed in paragraph 150(1.2)(b)?

Position: No.

Reasons: GIC issued by a Canadian bank or trust company does not meet the description of any of the assets listed in paragraph 150(1.2)(b). Therefore, if a particular trust holds a GIC issued by a Canadian bank or trust company, it would not be a trust described in paragraph 150(1.2)(b).

XXXXXXXXXX									2023-100008
										Aleksandra Bogdan	

June 28, 2024

Dear XXXXXXXXXX:

Re: Paragraph 150(1.2)(b)

This is in reply to your correspondence of November 30, 2023, wherein you requested our views with respect to paragraph 150(1.2)(b) of the Income Tax Act (the “Act”) (footnote 1) . In this regard, you have inquired whether Guaranteed Investment Certificates (“GICs”) issued by a Canadian bank or trust company are assets listed in paragraph 150(1.2)(b).

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

The exception in paragraph 150(1.2)(b) applies where a trust holds assets with a total fair market value that does not exceed $50,000 throughout the year, if the only assets held by the trust throughout the year are comprised of one or more of the assets as described in subparagraphs 150(1.2)(b)(i) to (vii). Overall, if a particular trust meets this exception, or one of the other exceptions listed in subsection 150(1.2), subsection 150(1) will not apply to require the trust to file a T3 Income Tax and Information Return where the trust also meets one of the exceptions in subsection 150(1.1). (footnote 2) The trust will also not be required to provide the additional information set out in section 204.2 of the Income Tax Regulations.

The asset listed in subparagraph 150(1.2)(b)(i) is money. Since the term “money” is not defined in the Act, we must look to the ordinary meaning of the term for guidance. The Black’s Law Dictionary, 11th edition, defines money as “the medium of exchange authorized or adopted by a government as part of its currency.” The Oxford English Dictionary, 3rd electronic edition, defines money as “any generally accepted medium of exchange which enables a society to trade goods without the need for barter; any objects or tokens regarded as a store of value and used as a medium of exchange.”

In Moss v. Hancock (1899) 2 Q.B. 116, the court stated that “Money as currency is that which passes freely from hand to hand throughout a community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it to any other use than in turn to tender it to others in discharge of debts or payment for commodities”.

The Government of Canada webpage “Guaranteed investment certificates and term deposits: know your rights” (footnote 3) , generally describes a GIC as a secured investment where the amount invested is returned at the end of the term. It is our view that a GIC issued by a Canadian bank or trust company would not fit within the ordinary meaning of money. Moreover, it is our general position that a GIC is a similar obligation to bonds, debentures, notes or mortgages.

The asset listed in subparagraph 150(1.2)(b)(ii) refers to a debt obligation described in paragraph (a) of the definition fully exempt interest in subsection 212(3). The debt obligations listed in paragraph (a) of the definition of fully exempt interest in subsection 212(3) refer to certain debt obligations of, or guaranteed by, the Government of Canada (otherwise than by being insured by the Canada Deposit Insurance Corporation), certain debt obligations of the government of a province, among others, but does not include a debt obligation issued by a Canadian bank or trust company.

Furthermore, the assets listed in subparagraphs 150(1.2)(b)(iii) to (vii) also do not include a GIC issued by a Canadian bank or trust company.

Overall, a GIC issued by a Canadian bank or trust company does not meet the description of any of the assets listed in paragraph 150(1.2)(b). Therefore, if a particular trust holds a GIC issued by a Canadian bank or trust company, it would not be a trust described in paragraph 150(1.2)(b).

We trust our comments will be of assistance.

Yours truly,

Marina Panourgias, CPA, TEP
Manager, Trust Section I
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

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

2 Note that a T3 Return may be required as a result of the reporting requirements in section 204 of the Income Tax Regulations. See the section titled, “Who should file” in the T4013 T3 Trust Guide for more information.

3 See webpage: https://www.canada.ca/en/financial-consumer-agency/services/rights-responsibilities/rights-investing/rights-guaranteed-investment-certificates.html