5-911387
19(1)
Re: Interpretation of subsections 105(1) and 107(2) of the Income Tax Act (the "Act")
We are writing in reply to your letter of May 14, 1991, in which you ask how the Department might apply the above-noted subsections where a capital beneficiary's interest in a trust is satisfied by distribution of property to a third party.
In our opinion, subsection 105(1) of the Act will apply to the distribution of any property to or for the benefit of a beneficiary of a trust except to the extent some other provision of the Act applies. Where it can be established in fact and in law that section 107 of the Act is applicable to a distribution because the beneficiary has directed or concurred with the distribution of the property in satisfaction of all or a portion of his capital interest in the trust, we would expect that the provisions of section 105 would not also apply.
The views expressed herein are not binding on the Department but we trust they are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate