| January 29, 1990 | |
| Returns Processing Division | Financial Industries Division |
| J.M. Legault, Director | W.C. Harding |
| (613) 957-3499 | |
| Attention: D.I. Wyse, Chief | |
| Trust and SER | File No. 7-4617 |
| Assessing Section | Your file: HAV 4533-3 |
| PC JL221-1 |
Subject: Validity of T2211 Subsection 73(5)
This is in reply to your memorandum of January 3, 1990 wherein you requested our opinion on the validity of an election to transfer shares to the trust of a minor under the provisions of subsection 73(5) of the Income Tax Act (the Act).
In the case under review, 24(1)
Subsection 73(5) requires that "...a taxpayer has transferred property to a child...", and it does not provide for this to be done "indirectly" through the means of a trust or otherwise. The administrative position to allow the transfer to occur through a trust was, apparently, developed in 1978 to provide some consistency with treatment allowed under other provisions of the Act, notable subsection 70(9).
The administratively permitted use of a trust was and continues to be allowed where the three conditions in paragraph 10 of Interpretation Bulletin IT-486R are complied with. A fourth condition, included in IT-486R but withdrawn in 1987, additionally provided that "use of the trust must be required because a provincial or other relevant statute does not permit property to be deeded to, or owned directly by, a child that is a minor".
In our opinion, our published administrative policy should be adhered to as it has been well established for a significant period of time and accordingly, we offer the following comments with respect to your specific plan:
24(1)
We trust these comments will be of assistance to you.
for DirectorFinancial Industries DivisionRulings Directorate