2014-0555081E5 Offshore Investment Fund Property

Principal Issues: Whether a portfolio of foreign mutual funds inherited by a non-resident person would become subject to an income inclusion under subsection 94.1(1) after the non-resident immigrates to Canada?

Position: No.

Reasons: Deemed reacquisition of the funds upon the immigration of the non-resident person pursuant to subsection 128.1(1) of the Act will not preclude the funds from continuing to qualify as prescribed offshore investment fund property.

Author: Ho, Judy
Section: 94.1, 128.1, Reg. 6900

XXXXXXXXXX                                                                                                                                          2014-055508
                                                                                                                                                                  Judy Ho
March 31, 2017

Dear XXXXXXXXXX:

Re:   Offshore Investment Fund Property

We are writing in response to your email in which you requested our views on whether a particular investment would continue to qualify as “prescribed offshore investment fund property” within the meaning of section 6900 of the Income Tax Regulations (“Regulation 6900”) in the following hypothetical situation.

A non-resident of Canada (“Taxpayer”) inherited a portfolio of foreign mutual funds (“Property”) from his father (also a non-resident of Canada). Subsequently to the acquisition of the Property, the Taxpayer immigrated to Canada. The Property is a property described in paragraphs (a) and (b) of subsection 94.1(1) of the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.), as amended, (the “Act”).

You are enquiring whether the Property would be considered “prescribed offshore investment fund property”, as defined in Regulation 6900 for purposes of the definition of “designated cost” in subsection 94.1(2) of the Act, despite the application of subsection 128.1(1) of the Act that deems the Taxpayer to dispose and re-acquire the Property immediately prior to his immigration to Canada.

Our comments

This technical interpretation provides general comments about the provisions of the Act.  It does not confirm the income tax treatment of a particular situation but is intended to assist you in making that determination.  The income tax treatment of transactions will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

Provided that prior to the immigration, all of the conditions of the definition of “prescribed offshore investment fund property” in Regulation 6900 are met, it is our view that the application of subsection 128.1(1) of the Act on the immigration of the Taxpayer will not prevent the Property from continuing to qualify under Regulation 6900 for purposes of section 94.1, based on our textual, contextual and purposive interpretation of the relevant provisions.

We trust our comments will be of assistance.

Yours truly,

Vitaliy Anissimov
Section Manager
For Division Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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