| 24(1) | File No. 901027 |
| D. Duff | |
| (613) 957-3498 |
19(1)
June 25, 1990
This is in reply to your letter of June 1, 1990, regarding the reasonableness test in subsection 104(19).
You referred to the example of a will creating a trust that requires the payment of one half of the annual income of the trust to each of two beneficiaries, and no authority or direction is given to the trustee regarding the designating provision of subsection 104(19). It is your opinion that, in such a situation, the reasonableness requirement of 104(19) would prevent a disproportionate allocation of dividend income to one of the beneficiaries.
It would be a question of fact whether a trustee has the authority to allocate trust income from different sources in disproportionate amounts. When the testator's will is silent in this regard, we would generally expect the income to be allocated on a pro-rata basis.
Regarding the assessment of such returns, we can advise you that although only a limited review of the return is done during the initial assessing procedures, all such files are subject to a more detailed review at a later date.
We trust this is satisfactory.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate