Roland St-Onge:—This is an appeal from an estate tax assessment dated June 13, 1972 in respect of the estate of James Anderson McArthur who died on March 16, 1971, at Victoria, BC, leaving a last will and testament dated March 7, 1967.
In this will there are some dispositions in respect of the income of the residue of his estate and one of them is made in favour of his surviving spouse in connection with a somewhat similar disposition in favour of the testator’s mother. The relevant paragraph of the will dealing with these matters is marked B(1)(a), (b) and (c), and reads as follows:
B. (1) Subject to the foregoing trusts my Trustees shall render into possession all the assets of my estate and shall sell and realize the same and invest the proceeds thereof, hereafter called “my Trust Fund”, in securities allowed by law for the investment of funds of Canadian Life Insurance Companies and shall pay out the net income from my Trust Fund in the manner following, that is to say:
(a) To my dear Mother, JEAN SIMPSON McARTHUR, fifty (50%) per cent of such income, or the sum of One hundred ($100.00) dollars per month, whichever amount is the lesser, such money to be paid monthly for and during the lifetime of my said mother or until the death of my wife, whichever event shall first happen, and I DECLARE that it is my intention that my said mother shall be kept in adequate comfort for the remainder of her life and that if by reason of health or hospital, doctors or other expenses, or by reason of the increase in the cost of living, my Trustees shall determine that additional sums of money should be paid to my mother, then my Trustees shall have full power to expend from that part of my Trust Fund which produces the income to be paid to my mother such sums of capital from time to time as my Trustees may determine sufficient for the purposes aforesaid. And for this purpose my Trust Fund shall be deemed to be divided Into two equal parts.
(b) To pay to my said wife for and during her lifetime the remaining income from my Trust Fund, such monies to be paid monthly. My Trustees shall also have full power to resort to the capital of my Trust Fund to provide in like fashion for the adequate care and comfort of my wife.
(c) Upon the death of my said mother the whole of the income from my Trust Fund shall be paid to my said wife for and during her lifetime by monthly instalments aforesaid with like power to resort to the capital of my Trust Fund to provide for the adequate comfort of my wife as aforesaid.
According to this paragraph, the appellant contends that the meaning of the above clauses is that the trust fund, ie the proceeds of conversion, is deemed to be divided into two halves for the purpose of dealing with the mother’s and wife’s income, and that each half is earmarked exclusively for one or the other. That means that the opening lines of clause B(1)(a) are to be read as giving the mother the income of 50% of the fund, ie the income of the half earmarked for her, and do not give 50% of the income of the whole fund, as the words literally suggest.
If that is the situation, the wife has an absolute and indefeasible settlement of half the residue in her favour, the income of which she is entitled to, and this is exempt under paragraph 7(1)(b) of the Estate Tax Act.
Paragraph 7(1 )(b) of the Estate Tax Act, RSC 1970, c E-9, reads as follows:
7. (1) For the purpose of computing the aggregate taxable value of the property passing on the death of a person, there may be deducted from the aggregate net value of.. .
(b) the value of any gift made by the deceased whether during his lifetime or by his will that can, within six months after the death of the deceased or such longer period as may be reasonable in the circumstances, be established to be absolute and indefeasible and that was made by him by the creation of a settlement under which
(I) the spouse of the deceased is entitled to receive
(A) all of the income of the settlement that arises after the death of the deceased and before the death of such spouse, or
(B) periodic payments in ascertained: amounts or limited to ascertained maximum amounts, to be made at intervals not greater than twelve months, out of the income of the settlement that arises after the death of the deceased and before the death of such spouse, or, if that Income is completely exhausted by those payments, out of the income and capital of the settlement, and
(ii) no person except such spouse may receive or otherwise obtain, after the death of the deceased and before the death of such spouse, any of the capital of the settlement or any use thereof, or any of the income of the settlement to which such spouse is entitled or any use thereof,
On the other hand, the respondent has refuted this contention, claiming that paragraph 7(1 )(b) exempts the value of any gift to a spouse absolute within the section’s terms that was made by settlement under which the spouse is entitled, inter alia, to all the income thereof in circumstances where no other person can obtain any of the capital after the death of the deceased and prior to the death of the spouse.
In the circumstances here, the spouse would, so long as the trust income exceeded $2,400 annually, receive more than half the income of the trust as a result of the mother being entitled to a maximum of $100 monthly. Accordingly, the spouse was not, as contended upon the estate’s behalf, entitled to the income from one half the trust fund, but was rather entitled to all but $1,200 annually of the trust income so long as such income amounted to more than $2,400 annually.
Paragraph B of the deceased’s will contemplates one trust fund whereupon the appeal must fail by virtue of subparagraph 7(1 )(b)(ii) of the Act because the spouse was not entitled to all the income of the settlement in circumstances where no other person could receive any of the capital of the settlement or any use thereof after the death of the deceased and before the death of the spouse.
The question at issue is whether the deceased in this case made one or two settlements under the terms of his last will as quoted hereinbefore. Obviously the wording of the will is in that respect ambiguous and it should be construed in the ambit of paragraph 7(1 )(b) of the Estate Tax Act. In the circumstances here the Board must consider the will as it is and should in no way whatsoever try to read in words that are not expressed. In establishing an express trust it is generally assumed that there are three requisites, sometimes called the “three Certainties” (Ontario Digest 21 CED p 363): (1) certainty of intention to create a trust; (2) certainty of subject-matter; (3) certainty of object.
It is obvious that these three requisites do not exist as to the two settlements which appellant contended were created in the said will. On the contrary, there is a clear intention to create only one trust when the testator says ‘‘My Trustees shall pay out the net income from my Trust Fund in the manner following”, and he gave a detailed description as to how the net income should be distributed and added “And for this purpose my Trust Fund shall be deemed to have been divided into two equal parts”, which means that there was only one trust but the fund was deemed to be divided only for the purpose of assisting the trustees to make the distribution of the income.
Furthermore, according to the will, the spouse was entitled to all but $1,200 annually of the trust income so long as such income amounted to more than $2,400 annually. Consequently, the spouse was not, as contended by the appellant, entitled to the income from one half of the trust fund.
When dealing with the question of exempting provisions, a taxpayer cannot succeed in claiming an exemption from tax unless his claim comes clearly within the provisions of some exempting section.
Now, according to subparagraph (ii) of paragraph 7(1 )(b) already quoted above, it is obvious that the income bequeathed to the widow does not meet the requisites of the exempting provisions of the Estate Tax Act.
Consequently the appeal is dismissed.
Appeal dismissed.