Dear Sirs:
Re: Welfare Trust Fund
This is in reply to your letter dated January 28, 1991 and a recent telephone conversation (Weil 19(1) in which you requested an Advance Income Tax Ruling with respect to a proposed cash refund to members of the above fund.
As you advised us that this proposed transaction is no longer contemplated, we are unable to comply with your request for an Advance Income Tax Ruling. We will, however, offer you general comments which may be of some assistance.
As stated in paragraph 6 of Interpretation Bulletin IT-85R2 (copy enclosed), a health and welfare trust is one in which the funds of the trust cannot revert to the employer or be used for any purpose other than providing health and welfare benefits for which the contributions were made. Therefore, a cash refund to members representing excess funds out of the Welfare Trust Fund would alter its tax status as a health and welfare trust as discussed in paragraph 3 of IT-85R2.
Your deposit of $400 will be returned to you under separate cover.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorLegislative and Intergovernmental Affairs