2016-0641511C6 2016 STEP - Q15 - Trust and Estate Issues

Principal Issues: CRA was asked to provide an update on recent trust and estate issues.

Position: An overview of four recently published documents relating to two T1135 issues, a subsection 159(6.1) election and the requirements under subsection 70(6) for a transfer to a spousal trust created by will were provided.

Reasons: See below.

Author: Kohnen, Phil
Section: 70(6); 104(4); 104(5.2); 152(4); 159(6.1) and 162(7)

STEP CRA Roundtable – June 10, 2016

Question 15.  Trust and Estate Issues

Can the CRA provide an update on some of the recent issues that it has considered relating to trusts and estates?

CRA Response

The Income Tax Rulings Directorate addresses a wide variety of issues relating to trusts and estates in our internal and external technical interpretations. The following is a brief overview of some of our recently published views that may interest the STEP audience.

Form T1135 and jointly held property:

At the 2015 Canadian Tax Foundation Annual Conference, CRA was asked how to report specified foreign property on form T1135, if the property is jointly held by spouses. Our response, in document 2015-0610641C6, noted that in general, CRA would compare each spouse’s share of the property with the $100,000 reporting threshold and that the respective shares would be based on the amounts contributed by each spouse toward the cost to purchase the property.

Form T1135 and normal reassessment period:

In internal interpretation 2015-0572771I7 we were asked whether the normal reassessment period for a T1135 return can be considered to be separate and apart from the normal reassessment period for the Part I return of the reporting entity. Our response noted that the filing deadline for the T1135 is the same as for the filing of the Part I return, and that any assessment for failure to file on time pursuant to subsection 162(7) must, subject to subsection 152(4), be made within the normal reassessment period for Part I.

Subsection 159(6.1) election:

In external interpretation 2015-0594201E5 we were asked whether an election pursuant to subsection 159(6.1) of the Income Tax Act can be made where a liability for tax arises from a deemed disposition of resource property. CRA noted that since subsection 159(6.1) specifically refers to tax liability arising on the occurrence of a time determined under paragraph 104(4)(a), (a.1), (a.2), (a.3), (a.4), (b) or (c) which is the time when a deemed disposition pursuant to subsection 104(5.2) occurs, an election under subsection 159(6.1) is possible.

Transfer pursuant to subsection 70(6):

At the 2015 APFF (l'Association de planification fiscale et financière) Conference, we were asked to consider a scenario in which an estate executor disposed of some of the assets of the estate of the deceased, in order to transfer the proceeds of disposition (or property substituted for those proceeds) to a spousal trust created by the will of the deceased. We were asked whether subsection 70(6) of the Income Tax Act could apply to the transfer.

Our response, in document 2015-0596611C6, noted that subsection 70(6) would not apply in the given scenario. It was noted that the rules in subsection 70(6) apply on a property-by-property basis, and that subsection 70(6) requires, inter alia, that the property transferred must be the same property that was deemed to have been disposed of by the deceased.

2016-064151
Phil Kohnen

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