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:
Is the scope of subsection 212(11) so large as to cause all capital distributions from a trust or estate to be subject to Part XIII tax?
Position:
Only to the extent that it is an amount described in subparagraph 212(1)(c)(i) or (ii) of the Act
Reasons:
See response to question #8 at 1994 Alberta Chartered Accountants Roundtable
971526
XXXXXXXXXX David R. Senécal
Attention: XXXXXXXXXX
October 20, 1997
Dear Sirs:
Re: Interaction of Subsection 212(11) and Paragraph 212(1)(c) of the Income Tax Act (the "Act")
This is in reply to your letter of June 4, 1997, regarding the interaction of the above-mentioned provisions of the Act. As a result of an amendment made in 1991 to subsection 212(11) of the Act, you believe that the wording of the provision is now broad enough that any capital distribution whatsoever from a trust or an estate will be subject to Part XIII tax. In your view, the scope of the provision goes beyond that indicated in the Technical Notes issued by the Department of Finance in May of 1991.
In our view, subsection 212(11) of the Act merely characterizes any amount paid or credited by a trust or estate as income of the trust or estate for the purposes of paragraph 212(1)(c) of the Act. The wording in paragraph 212(1)(c) then makes it clear that such an amount is only subject to Part XIII tax to the extent it is an amount described in subparagraph 212(1)(c)(i) or (ii) of the Act. In general, this would be, respectively:
1) an amount that would have been subject to tax under Part I of the Act if it had been paid to a person resident in Canada to whom Part I was applicable, except to the extent that the amount is deemed by subsection 104(21) of the Act to be a taxable capital gain of a non-resident investor in a mutual fund trust; or
2) a distribution made by a trust or an estate where that distribution may reasonably be considered to relate to a capital dividend received by the trust or estate.
We trust that our comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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