| 24(1) | 5-902884 |
| F. Francis | |
| (613) 957-3496 |
19(1)
December 7, 1990
Dear Sirs:
This is in reply to your letter of October 10, 1990, wherein you requested our comments as to whether a trust would qualify as a "spousal trust" for purposes of paragraph 70(6)(b) of the Income Tax Act (the "Act") in a situation where the trust is liable for tax on capital gains realized by it.
We do not express opinions in respect of factual transactions other than as a reply to an advance income tax ruling request. We will, however, provide the following general comments.
It should be noted that, pursuant to subsection 108(3) of the Act, the "income" of a trust for purposes of subparagraph 70(6)(b)(i) of the Act is its income computed without reference to the Act and generally does not include taxable capital gains. As a consequence thereof, a trust would meet the requirements under subparagraph 70(6)(b)(i) of the Act, notwithstanding that the spouse's right to income does not extend to taxable capital gains.
We further note that, by virtue of paragraph 108(4)(b) of the Act, payment by a trust of the income tax liability resulting from taxable capital gains realized by it would not be contrary to the provisions under subparagraph 70(6)(b)(ii) of the Act.
It is therefore our view that the payment of income tax out of the taxable capital gains of the trust would not, in and of itself, preclude the trust from qualifying as a spousal trust under paragraph 70(6)(b) of the Act.
The above comments are an expression of opinion and are not binding on the Department. We trust that they will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate