| 19(1) | File No. 5-8739 |
| Maureen Shea-DesRosierss | |
| (613) 957-8953 |
November 1, 1989
Dear Sirs:
This is in reply to your letter of September 25, 1989, concerning the residual interest of a Testamentary Spousal Trust.
Since a copy of the Will was not submitted with your letter and many questions remain unanswered we will offer you the following general comments.
Interpretation Bulletin IT-226 at paragraph 4 states, "In cases where the residual interest is not reasonably ascertainable, such as when the life tenant has the right to encroach on capital. no deduction in respect of charitable donations will be allowed". It follows that an individual who has established a spousal trust in his will would not be entitled to a deduction (or credit) under subsections 118.1(1) and (3) of the Income Tax Act (the "Act") equal to the present value of the residual interest gifted to the registered charity.
If there were no encroachment power and the residual interest in the estate is ascertainable at the time of death, the gift could be claimed on the deceased's T-1 Terminal Return. In such a case the estate would not be entitled to a deduction on the ultimate distribution to the charity.
The spousal trust would not be entitled to a deduction (or credit) under the Act since the spousal trust does not make the gift, it only carries our the instructions of the testator spouse. The same applies to the widow. Upon her death the gift could not be claimed on her T-1 Terminal Return.
Since this is an actual situation, it should be discussed with your local District Office which can inform you as to the proper procedures to follow.
We trust the above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate