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.
June 30, 2000
TORONTO WEST TSO Income Tax Rulings and Interpretations Directorate Attention: Effie Ledo R. Maley (613) 957-9226
2000-002758
Subsection 118.1(6) - XXXXXXXXXX
This is in response to your letter of May 23, 2000 requesting our comments on the above-noted matter.
We understand the relevant facts to be as follows. The will of XXXXXXXXXX provides that the residue of her estate be distributed in accordance with the specific bequests set out in the will. The specific bequests include gifts to XXXXXXXXXX charities. The trustee of the estate has advised that the residual property of the estate is composed of both cash and shares of certain companies. The trustee would like to distribute the shares of the companies to the charities in satisfaction of their entitlement as residual beneficiaries, and distribute cash to the non-charitable beneficiaries. The terms of the will would appear to permit distribution of the residue either in cash or in specie.
You have asked for confirmation that the distribution of shares to the charities would constitute a gift by will for the purposes of subsection 118.1(6). In our view, where a will stipulates that a donation of a specific percentage of the residue of an estate be made to a specific charity, but the amount of the total residue of the estate depends upon certain discretionary actions of the trustee, the gift would nonetheless qualify as a gift by will if the actions taken by the trustee are reasonable and in accordance with the terms of the will.
In this case, it seems reasonable for the trustee to distribute shares to charitable beneficiaries and cash to non-charitable beneficiaries as that course of action would maximize the after-tax value of the residue. As long as the trustee proceeds to distribute the residue in accordance with the terms of the will, the estate should be entitled to the benefit of subsection 118.1(6).
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (613) 994-2898. A copy will be sent to you for delivery to the client.
F. Lee Workman
Manager
Financial Institutions
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate