24(1)
5-902486
D.S. Delorey
(613) 957-3495
19(1)November 14, 1990
Dear Madam:
This is in reply to your letter of September 11, 1990 concerning the Family Law Act (Ontario) ("FLA") and subsections 70(6) and (6.1) of the Income Tax Act (the "Act").
Our response to the three questions raised in your letter are as follows:
1. As indicated in paragraph 7 of Interpretation Bulletin IT-449R , where a deceased taxpayer's surviving spouse receives property under the FLA, the property transferred to the spouse would be in consequence of the death of the taxpayer for the purposes of subsection 70(6) of the Act. This is based on our view that the receipt of property under the FLA constitutes a disclaimer of the type mentioned in paragraph 248(8)(b) of the Act. That paragraph states that a transfer of property as a consequence of a disclaimer, release or surrender by a person who was a beneficiary under the will or other testamentary instrument or on the intestacy of a taxpayer shall be considered to be a transfer as a consequence of the death of the taxpayer.
2. Where the surviving spouse reaches a settlement with the executors and beneficiaries of the estate that property in the deceased's estate will be transferred to the surviving spouse in consideration of a release of his or her rights to make a claim under the FLA for an equalization of net family property, it is our view that the transfer would not be considered a transfer as a
consequence of the death of the deceased. In this situation, the requirements in subsection 248(8) of the Act would not be met in that the transfer would not arise as a consequence of the terms of a will or other testamentary instrument, or as a consequence of the law governing the intestacy of a taxpayer, but as a result of a separate arrangement between the executors, beneficiaries and surviving spouse.
3. It is our view that a trust created by an order under the FLA would be a trust that satisfies the criterion set out in paragraph 70(6.1)(b) of the Act.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust however that they are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate