| 24(1) | 5-902411 |
| M.P. Baldwin | |
| (613) 957-3499 | |
| 19(1) | |
| October 30, 1990 |
Dear Sir,
Re: Spousal Trust - Subsection 70(6) of the Income Tax Act
This is in reply to your letter of September 10, 1990 concerning the above mentioned subject. In your letter you requested our views on the effect a clause, which authorizes the trustee to distinguish income and capital items in respect of the trust property, could have on a testamentary trust's status as a spousal trust.
It is our view that such discretionary powers cannot change the nature of an amount of income or deductible expense into a capital receipt or expenditure or vice versa. As stated in paragraph 10 of Interpretation Bulletin IT-305R3 if the trust is a qualifying trust its income is determined for trust purposes under section 108(3) of the Act to exclude amounts that are income for income tax purposes (e.g. taxable capital gains). As such, the wording of the specific clause referred to above would have to be very specific, as the Department would not accept that the trustee would have the power to rule that income (e.g. interest) could be capital.
The above comments are an expression of opinion only and do not bind the Department.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate