| 19(1) | File No. 5-9679 |
| D.S. Delorey | |
| (613) 957-3495 |
April 10, 1990
Dear Sir:
Re: Subsection 104(13.1) Designations
This is in reply to your letter of February 26, 1990 and further to our telephone conversation (Delorey/ 19(1) on March 29, 1990 concerning designations by a trust under subsection 104(13.1) of the Income Tax Act (the "Act").
Where an income beneficiary has agreed to bear the burden of a trust's tax liability arising out of a subsection 104(13.1) designation, it is our view that the payment of the taxes by the beneficiary will not in and of itself result in either a contribution to the trust for the purpose of subparagraph 108(1)(i)(ii) of the Act or a gift to the trust for the purpose of paragraph 122(2)(d) of the Act. The amount paid by the beneficiary must be equal to the taxes payable by the trust on income that would have been received by the beneficiary but for the designation.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R. We trust however that they are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate