Principal Issues: Whether the term "contributor" defined in subsection 251.1(3) includes a deceased person?
Position: For the purposes of the definition of "contributor" in subsection 251.1 (3), we are of the view that, depending on the context, a deceased person may be considered to have, at a given time, made a loan or a transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of a trust. This position applies to any transfer of property made as a consequence of death of a taxpayer as well as to any loan or transfer of property made by a taxpayer, before his or her death.
Reasons: Based on a textual, contextual and purposive analysis of the definition of "contributor" in subsection 251.1(3).
FINANCIAL STRATEGIES AND INSTRUMENTS ROUNDTABLE, OCTOBER 10, 2014
2014 APFF CONFERENCE
Question 5
Definition of "contributor" to trust for purposes of trust affiliation rules
Subsection 251.1(3) defines the term "cotisant" ("contributor" in the English version) to a trust for the purposes of the affiliation rules surrounding trusts, as follows:
A person who has at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust other than, if the person deals at arm’s length with the trust at that time and is not immediately after that time a majority-interest beneficiary of the trust,
(a) a loan made at a reasonable rate of interest; or
(b) a transfer made for fair market value consideration.
Section 94(1) defines the term "contribuant ("contributor" in the English version for the purposes of section 94 and 94.2 only as:
contributor to a trust at any time means a person (other than an exempt person but including a person that has ceased to exist) that, at or before that time, has made a contribution to the trust.
The definition of contributor under section 94(1) includes a deceased person, but this subsection does not apply to section 251.1, and this clarification is not included in the definition of "contributor" in subsection 251.1(3).
Question to the CRA
Does the term "contributor" in section 251.1(3) include a deceased person? For example, is the testator who created a testamentary trust for the benefit of the spouse a "contributor" to that trust after his or her death?
CRA response
The question of whether a deceased person satisfies all the conditions in the definition of "contributor" under subsection 251.1(3) is a question of fact and of law which can only be resolved after a full examination of all relevant facts, actions, circumstances and documents surrounding each situation. Given that the statement in this question contains very little information on the context in which the definition of "contributor" within the meaning of subsection 251.1(3) would be applied, we will limit ourselves to making the following general comments.
For the purposes of the definition of "contributor" in subsection 251.1(3), we are of the view that, depending on the context, a deceased person could be considered as having at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of a trust. This position applies to transfers of property made as a result of the death of a taxpayer and to inter vivos loans or transfers of property made by a taxpayer prior to his or her death.
Person at the Income Tax Directorate responsible:
Marie-Claude Routhier
(613) 957-9768
2014-053485