| 24(1) | 901477 |
| Maureen Shea-DesRosierss | |
| (613) 957-8953 | |
| Attention: 19(1) | EACC9281 |
August 22, 1990
Dear Sirs:
Re: Subsection 104(21) and 104(21.2) of the Income Tax Act (the "Act")
This is in reply to your letter of June 27, 1990 concerning the above-mentioned subject.
You described a situation where a Canadian resident trust owns various capital properties. During the year the trust disposes of certain properties and realizes a capital gain. The beneficiaries are individuals resident in Canada at the time that the capital gain is realized but cease to be resident in Canada before the end of the calendar year.
Section 114 of the Income Tax Act provides the method of calculating taxable income for an individual who is resident in Canada during part of a taxation year, and during some other part of the year is not resident, employed or carrying on business in Canada.
Paragraph 114(a) of the Act requires the taxpayer to report his world income from all sources including capital gains for the period or periods in the year during which he was resident in Canada, was employed in Canada or was carrying on business in Canada.
It is our opinion that the trust can designate its net taxable capital gains pursuant to subsection 104(21) of the Act to the beneficiary but only for the period or periods in the year during which the beneficiary was resident in Canada. If the trust makes the designation pursuant to subsection 104(21) and (21.2) of the Act, the beneficiary will be deemed to have realized a capital gain at the time in the year that the trust disposes of its capital property.
We trust the above comments will be of assistance to you.
Yours truly,
Wayne Douglasfor DirectorFinancial Industries DivisionRulings DirectorateLegislative & Intergovernmental Affairs Branch