| 24(1) | 5-901758 |
| D.S. Delorey | |
| (613) 957-3495 |
19(1)
November 7, 1990
Dear Sirs:
This is in reply to your letter of July 30, 1990 concerning the application of the formula in subsection 104(13.1) of the Income Tax Act (the "Act") to a non-resident beneficiary.
In particular, you are concerned that the amount in C of the formula would appear to be zero, given that a non-resident beneficiary is taxed under paragraph 212(1)(c) of the Act rather than under subsections 104(13) or 105(2) of the Act. If so, you consider the formula to be unworkable where a non-resident beneficiary is concerned.
Our comments
There are two steps involved in determining the extent to which a payment made to a non-resident beneficiary by a trust is subject to Part XIII tax under paragraph 212(1)(c) of the Act, namely;
(a) the non-resident is first assumed to be a beneficiary resident in Canada, and
(b) a determination is made of the extent to which the payment "would be included in the income of the beneficiary by reason of subsections 104(13) or 105(2) of the Act".
It is our view that the assumption under (a) above would apply for the purposes of determining the amount to be included in C of the subsection 104(13.1) formula where a non-resident is concerned. With this in mind and given that the wording of C of the formula is similar to that in (b) above, the C amount would thus be equal to the amount that would otherwise be subject to Part XIII tax under paragraph 212(1)(c) of the Act.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust however that they are of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate