| July 19, 1990 | |
| EACC 9235 | |
| Mr. Brian Bryson | |
| Acting Director | |
| Current Amendments | |
| and Regulations Division | |
| Revenue Canada, Taxation | |
| Room 1048, MacDonald Building123 Slater StreetOttawa, OntarioK1A 0L8Room 1048, MacDonald Building123 Slater StreetOttawa, OntarioK1A 0L8 |
This is in reply to your letter of May 17, 1990 with respect to the use of spousal trusts to transfer taxable Canadian Property and Canadian resource property.
I would expect that the factual situation you outline is quite unusual. For the provisions to apply in the manner you describe, it would be necessary that the taxpayer be resident in Canada and that his or her spouse not be so resident. This would likely be most common in situations where a couple are estranged or separated. However, in these circumstances, one would not expect the taxpayer to establish a spousal trust for the lifetime benefit of his or her spouse (hereafter referred to in relation to the taxpayer as the "taxpayer's beneficiary").
As you point out, a taxpayer is allowed to transfer property directly to his or her spouse under subsection 73(1) of the Income Tax Act only where both taxpayer and spouse are resident in Canada. A taxpayer is, however, allowed to transfer property under that subsection to a spousal trust for the benefit of the taxpayer's beneficiary where the taxpayer and the trust are resident in Canada. If the property is taxable Canadian property or resource property, the trust may subsequently rollover the property to the taxpayer's beneficiary even if he or she resides outside Canada. This would allow the taxpayer to transfer taxable Canadian property or resource property to the taxpayer's beneficiary indirectly even though such a transfer could not be effected directly.
21(1)(b)
R.A. ShortGeneral DirectorTax Policy & Legislation Branch