| June 21, 1990 | |
| Assessing and Enquiries | Rulings Directorate |
| Directorate | Financial Industries Division |
| D.S. Delorey | |
| Attention: G. Venner | |
| Director General | |
| File No. 5-900958 |
Subject: Family Allowance Benefits Paragraph 16 of Information Circular 79-9R
We have received an enquiry from a taxpayer concerning the administrative practice set out in paragraph 16(a) of Information Circular 79-9R. That paragraph states that where the recipient of family allowance benefits deposits the funds in a trust, the income earned on the deposited funds will be considered to be that of the relevant child provided the trust funds can be readily identified as property of the child. Relative to this practice, we seek clarification of your administrative position on the following two points:
1. Assuming that (a) a trust is involved, (b) trust funds originating from family allowance benefits can be readily identified as the property of the child on whose behalf the benefits were received and (c) the trust has no other source of funds, the trust would have no income at any time under the above-mentioned practice to flow through to a beneficiary; i.e., the income earned on the funds would be of the child. Given this scenario, would you nevertheless require that T3 returns be filed.
2. If the draft form submitted by the taxpayer (copy attached) were completed in all respects and were made available to the Department, would the completed form be sufficient to enable you to "readily identify" that the family allowance benefits invested in the insurance contract are the property of the named child.
Attached are copies of the taxpayer's enquiry and related correspondence with the Enquiries and Taxpayer Assistance Division. While we remain of the view, given the above mentioned practice, that the issues are primarily administrative rather than interpretive in nature, we are nevertheless prepared to reply to the taxpayer once your views on the above two points are received.
Director GeneralRulings Directorate