| Financial Institutions | |
| N. Goldstein | |
| (613) 957 3499 |
24(1)
Attention: 19(1)
January 7, 1992
Dear Sir:
Re: Off-Shore Trust and Life Insurance Plans
We are responding to your letter of April 19, 1991. We apologize for the delay.
The income tax treatment in Canada for income or capital receipts from a trust and the income or capital receipts from an insurance policy differ considerably. We are unable to ascertain whether a beneficiary of the 24(1) will be receiving income from a trust or income from an insurance policy based on the information provided, nor are we able to determine if a taxpayer is a resident of Canada or not. Accordingly, we are unable to provide you with any specific comments regarding the potential tax effects of a Canadian resident owning an interest in the 24(1)
If you have a particular proposed transaction in respect of which you would like Revenue Canada's interpretation of specific income tax implications, you may wish to consider requesting an advance income tax ruling. In this regard we enclose herewith a copy of the Department's Information Circular 70-6R2.
We can inform you that a resident of Canada is taxed on his worldwide income, including income earned or deemed to be earned in an offshore trust. In this regard, we enclose Interpretation Bulletin IT-342R which discusses, in general terms, the taxation of income payable to a Canadian resident by a trust. We also enclose Interpretation Bulletin IT-87R which discusses the taxation of income earned from life insurance policies and the taxation from the disposition of life insurance policies.
We would note that under the Income Tax Act of Canada, a non- resident, upon becoming a resident of Canada is deemed, in certain circumstances, to have acquired certain assets, including possibly an interest in a trust on the date the non-resident becomes a resident of Canada.
In other instances, a taxpayer is considered to have owned an asset, including an interest in a life insurance policy, since the asset was acquired, regardless of when the taxpayer became a resident of Canada. Both the type of asset and the date on which a taxpayer is considered to have acquired an asset are of significance in determining the amount of tax payable upon the disposition of the asset.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate