30 June 1997 External T.I. 9714835 - AGGREGATION OF TESTAMENTARY 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.

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. Where will provides for assets of deceased to split into 2 testamentary trusts - one in which spouse benefits & child #1 is the residuary beneficiary upon spouses' death & the second whereby spouse still benefits during her lifetime but child #2 is the residuary beneficiary, will the dept apply 104(2) so to aggregate the two trusts?

Position:

1. Depends on facts.

Reasons:

1. Responsibility to apply 104(2) lies with Minister designated authority - Director of TSO; general guidelines given.

971483
XXXXXXXXXX L. Holloway

Attention: XXXXXXXXXX

June 30, 1997

Dear Sirs:

Re: Taxation of Testamentary Trusts

This is in reply to your letter of May 26, 1997, wherein you requested that we provide an interpretation with respect to the applicability of subsection 104(2) to a particular fact situation.

The situation presented in your letter appears to represent an actual fact situation and as explained in Information Circular 70-6R3, your enquiry should be directed to your local Tax Services Office. We can however provide you with the following general comments which may be of assistance to you.

Your letter described a will which created two testamentary trusts, the spouse and child #1 being the income and residuary beneficiaries, respectively, of Trust #1 and the spouse and child #2 being the income and residuary beneficiaries, respectively, of Trust #2. Your question concerns the applicability of subsection 104(2) to such trusts.

Pursuant to subsection 900(2) of the Income Tax Regulations, the authority of the Minister to make a designation under subsection 104(2) is the responsibility of the Director of Tax Services of the relevant Tax Services Office. As such, each designation will be very fact specific. While not exhaustive, a list of some of the factors which may be considered in such a determination include:

-whether or not there was a clear intent by the testator, as evidenced by the terms of the will, to create separate trusts,

-whether or not the trusts had common beneficiaries,

-whether or not the assets of each trust were segregated and accounted for separately (e.g. separate bank accounts, no undivided interests in property, separate accounting records), and

-the conduct and powers of the trustees.

We trust our comments will be of assistance to you.

Yours truly,
T. Murphy
for Director
Resources, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch