24 April 1990 Income Tax Severed Letter ACC9151 - "Interest" of Beneficiary in Assets of Discretionary Trust

By services, 22 July, 2022
Official title
"Interest" of Beneficiary in Assets of Discretionary Trust
Language
English
Document number
Citation name
ACC9151
Severed letter type
Miscellaneous
d7 import status
Drupal 7 entity type
Node
Drupal 7 entity ID
658205
Extra import data
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"field_release_date_new": "1990-04-24 08:00:00",
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Main text

April 24, 1990

International Audits Division       Financial Industries Division
Head Office                         W.C. Harding
                                    (613) 957-3499
Attention:  David Burton

Vancouver District Office Question

Attached is our proposed reply to the question you submitted to us for comment.

for Director Financial Industries Division Rulings Directorate

Question:

1. Does RCT consider that a beneficiary under a discretionary trust who receives income or capital completely at the discretion of the trustee has an "interest" in the specific assets of the trust?

2. Will the answer be different if there is only 1 beneficiary?

Answer:

In theory there are two ways of viewing a beneficiary's interest in a trust. One is that the interest is a chose in action, the other that it is in "substance" an interest in the property of the trust. This latter view has in some cases been adopted in the drafting of legislation. In particular, it is explicitly embodied in the provisions of subsection 74.4(4) of the Income Tax Act which states:

"(a) the only interest that the designated person has in the corporation is a beneficial interest in shares of the corporation held by a trust."

The department has to-date not determined if the "substance" approach should be applied in the circumstances of section 94.1 of the Act. We have been examining this and similar issues and expect to be able to provide a more definitive answer in the future.