903515
O. Laurikainen
(613) 957-2129
24(1)19(1)January 15, 1991
Dear Sirs:
Re: Non-Resident Trusts
This is further to your enquiry of December 11, 1990 concerning the application of paragraph 94(1)(c) of the Income Tax Act (the "Act"), to a trust not resident in Canada. You question whether subparagraphs 94(1)(c)(i) and (ii) of the Act have application to such a trust where the proportionate entitlements of the beneficiaries are fixed and the only discretion of the trustees, pursuant to the trust indenture, is as to the amount to be distributed at any time on a prorata basis to each beneficiary and the timing of such prorata distributions.
In our view such a trust would not be a trust "where the amount of the income or capital of the trust to be distributed at any time to any beneficiary of the trust depends upon the exercise by any person of, ..., any discretionary power" for the purposes of paragraph 94(1)(c) of the Act. Accordingly, the provisions of subparagraphs 94(1)(c)(i) and (ii) of the Act would not apply to such a trust. In our view those provisions only operate where the trustees, pursuant to the trust indenture, have the discretionary power to distribute the income or capital of the trust to one or more beneficiaries at the exclusion of others. In such cases, it is generally not possible to measure the fair market value of a particular beneficiary's beneficial interest in the trust.
We trust this is the information you require.
Yours truly,
for Director Reorganizations and Non-Resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
000190