| 911986 | |
| A.Y. Ho | |
| (613) 957-4796 |
24(1)
Attention: 19(1)
January 23, 1992
Dear Sirs:
Re: Bare Trustee Company
This is in reply to your letter of July 12, 1991 asking us to confirm whether the Department will continue with its policy of ignoring the existence of a bare trust for income tax purposes.
You mention that the current practice of Revenue Canada, Excise ("RCE") regarding the administration of the Goods and Services Tax ("GST") is to treat a company acting as a trustee of a bare trust that holds title to real property for a group of co-owners as the owner of the property and to view the trust as an inter vivos trust. You point out that this practice is in conflict with the Department's position on the issue of bare trusts.
In the 1989 Corporate Management Tax Conference Report (the "Report"), the Department stated that for a bare trust which is effective for commercial purposes to be ignored for income tax purposes, the trustee thereof cannot have any significant powers or responsibilities and cannot take any action regarding trust property without instructions from the settlor. Furthermore, the settlor must be the sole beneficiary and must be able to cause the property to revert to him at any time. This continues to be the position of the Department.
As was stated in the Report, the Department is reviewing the above position and until the review is completed, taxpayers may continue to rely on our published positions in IT-216, IT-437 and ATR-1 (i.e. where property is transferred to a bare trust as described in the paragraph immediately above, for all income tax purposes, the settlor will be considered the owner of the trust property).
Insofar as any conflict that you perceive between our position on bare trusts and RCE's is concerned, we would point out that GST and income tax are two very different kinds of taxes each with its own complex set of rules and regulations. This in and of itself may very well give rise to different positions on similar matters by the two departments. We have informally raised this matter with officials of RCE. They have indicated that their position is preliminary and may be subject to change. Should you require additional information on the GST side ofthe matter, you may contact RCE official, R. Wong, at (613) 954-1512.
We trust the above comments are of assistance.
Yours truly,
for DirectorManufacturing Industries, Partnershipsand Trusts DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch
c.c. R. Wong