| 24(1) | File No. 3-2926 |
| J.A Szeszycki | |
| (613) 957-2103 |
March 29, 1990
Dear Sirs:
Re: Request for Income Tax Ruling
We are responding to your letter of December 20, 1989, requesting an advance income tax ruling. As noted in Information Circular 70- 6R, an advance income tax ruling (for which a fee is charged) will only be provided in respect of proposed transactions. The situation described in your letter reflects events taking place in the past and completed transactions. We are, therefore, unable to provide you with an advance ruling as requested. We are prepared, however, to express an opinion with respect to the issue raised.
24(1)
Our Comments
We have carefully reviewed the provisions of the Will and find that we cannot agree with your opinion that a spouse trust had been created, as described in subsection 70(6) of the Act. In order for subsection 70(6) to have application the criteria set out in paragraph (b) of that subsection must be met. Subparagraph (ii) requires that "no person except the spouse may, before the spouse's death, receive or otherwise obtain the use of any of the income or capital of the trust".
24(1)
Consequently, the trust that had been set up did not meet the criterion described in subparagraph (ii) and therefore cannot be considered a spouse trust.
You further indicated in your letter your view that the spouse was the "beneficial" owner of the property for the period following her husband's death by virtue of the life interest conferred on her by the Will. Interpretation Bulletin IT-437 discusses in paragraph 2, the subject of beneficial ownership. A property can be beneficially owned by an individual who is not the legal owner if the individual enjoys many of the rights and privileges and assumes some of the responsibilities of ownership. The main characteristics of ownership discussed in the bulletin include the right to possession, the right to collect rents, the right to call for mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair and maintain the property, and the obligation to pay property taxes. This aspect was discussed in a telephone conversation (Szeszycki 19(1)) of February 12 at which time it was assumed that the spouse did indeed have all of the rights and obligations referred to above. Upon further review, however, it appears that our assumption may not be valid.
24(1)
Consequently, we conclude
24(1)
The foregoing is an expression of opinion only and as such is not considered binding on the Department. The $250.00 forwarded with your request for a ruling will be returned to you under separate cover.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch