2017-0733441R3 Amendment of trust terms

Principal Issues: Will proposed amendment to the trust indenture be so significant so as to cause a resettlement of the trust, or a disposition of a beneficiary's interest in the trust?

Position: No resettlement or disposition of beneficiary's interest.

Reasons: Minor variation - removing age restriction cap for those who can act as trustees of the trust.

Author: XXXXXXXXXX
Section: 248(1) definition of disposition

XXXXXXXXXX                                                                                                         2017-073344

Attention: XXXXXXXXXX

XXXXXXXXXX, 2017

Dear XXXXXXXXXX:

Re:   XXXXXXXXXX
         Advance Income Tax Ruling Request

This is in reply to your letter dated XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge the information provided in correspondence and telephone conversations concerning your request. You have advised that to the best of your knowledge, and that of the taxpayer, none of the issues contained herein:

(a)   involves a previously filed tax return of the taxpayer or a related person;

(b)   is being considered by a tax services office or a taxation centre in connection with a previously filed tax return of the taxpayer or a related person;

(c)   is under objection by the taxpayer or a related person;

(d)   is before the courts; or

(e)   is the subject of a ruling previously considered by the Directorate.

You have also advised that to the best of your knowledge, and that of the responsible officers of the taxpayer, the proposed transactions will not result in the taxpayer or any related person described herein being unable to pay its existing outstanding tax liabilities. Unless otherwise expressly stated, every reference herein to a part, section or subsection, paragraph or subparagraph and clause or subclause is a reference to the relevant provision of the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended from time to time and consolidated to the date of this letter (the “Act’) and each reference to a technical tax term has the same meaning as such term has in the Act.

DEFINITIONS

The following definitions apply in respect of this advance income tax ruling.  Throughout this letter, the singular should be read as plural and vice versa where the circumstances so require.

“Appointor” shall have the meaning ascribed to that term in the Trust Deed.

"Beneficiaries" shall have the meaning ascribed to that term in the Trust Deed.

"CRA" means the Canada Revenue Agency.

“Disposition” means a disposition as defined in subsection 248(1).

"Family" means the set of individuals consisting of XXXXXXXXXX his XXXXXXXXXX, as well as his issue and other individuals described in the definition of this term in the Trust Deed.

"Family Trustee” means a Trustee of the Trust that is a member of the Family.

"Independent Trustee" means the one Trustee of the Trust that is not related to the XXXXXXXXXX family, and as of the date of this letter is XXXXXXXXXX.

"Trust" means the XXXXXXXXXX.

“Trust Amendment” means the amendment to the Trust Deed described in paragraph 8 below.

"Trust Deed" means the Declaration of Trust established XXXXXXXXXX under the laws of the Province of XXXXXXXXXX on XXXXXXXXXX.

“Trustees” means the trustees of the Trust.

The relevant facts, proposed transaction and the purpose of the proposed transaction are as follows:

FACTS

1.    The Trust was established XXXXXXXXXX under the laws of the Province of XXXXXXXXXX on XXXXXXXXXX. The tax account number for the Trust is XXXXXXXXXX.  The Trust files its returns at XXXXXXXXXX and deals with the XXXXXXXXXX Tax Services Office. Its mailing address is XXXXXXXXXX.

2.    The Trust Deed contemplates XXXXXXXXXX Trustees of which at least one, the Independent Trustee, will not be related to the Family.

3.    The Independent Trustee was first appointed at the Trust’s inception on XXXXXXXXXX, and has been the Independent Trustee continuously since that date to present.

4.    Section 4.12 of the Trust Deed states:

“4.12 Any individual Trustee, other than a Family Trustee, who shall attain the age of XXXXXXXXXX years while in office, shall cease to be a Trustee on the last day of the calendar year during which he or she shall have attained such age unless he or she shall be permitted to continue in office by the Appointor or Appointors then in office and for such period or periods of time as the Appointor or Appointors may, from time to time, determine unanimously.  However, any such individual Independent Trustee shall cease to act in such capacity at the end of the year during which he or she reaches the age of XXXXXXXXXX.”

5.    The Independent Trustee turned XXXXXXXXXX in XXXXXXXXXX and his term of office has been extended annually by the Appointor(s) in accordance with the provisions of the Trust Deed.

6.    The Independent Trustee turned XXXXXXXXXX this year.

7.    The Family Trustees wish the Independent Trustee to continue in office, and he has agreed to remain as a Trustee.

PROPOSED TRANSACTION

8.    The Trustees propose to cause the deletion of the last sentence of section 4.12 of the Trust Deed, such that section 4.12 will read as follows:

“4.12 Any individual Trustee, other than a Family Trustee, who shall attain the age of XXXXXXXXXX years while in office, shall cease to be a Trustee on the last day of the calendar year during which he or she shall have attained such age unless he or she shall be permitted to continue in office by the Appointor or Appointors then in office and for such period or periods of time as the Appointor or Appointors may, from time to time, determine unanimously.”

The Trust Amendment will not result in a resettlement of the Trust or in the creation of a new trust under the laws of the Province of XXXXXXXXXX.

PURPOSE OF THE PROPOSED TRANSACTION

The purpose of the proposed transaction is to permit the current Independent Trustee to continue to serve as the Independent Trustee. The current Independent Trustee is a long-term highly-esteemed business advisor and counsellor to the Family.

RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transaction and the purpose of the proposed transaction, and that the proposed transaction is completed in the manner described above, our rulings are as follows:

A.    The Trust Amendment will not, in and by itself, result in a disposition by the Trust of its property or in a resettlement of the Trust for purposes of the Act.

B.    The Trust Amendment will not, in and by itself, result in a disposition of all or any part of the interest in the Trust of any of the Beneficiaries of the Trust.

COMMENTS

Except as expressly stated, this advance income tax ruling does not imply acceptance, approval or confirmation of any other income tax implications of the facts or proposed transaction described herein.  For greater certainty, the CRA has not considered, confirmed or made any determination in respect of:

i)    whether the Trust Amendment will result in the creation of a new trust under the laws of the province of XXXXXXXXXX; and

ii)   the tax consequences of any amendments made to the Trust Deed before the date of this letter.

The above advance income tax rulings, which are based on the Act and Regulations in their present form and do not take into account any proposed amendments thereto, are given, subject to the general limitations and qualifications set out in Information Circular 70-6R7 Advance Income Tax Rulings and Technical Interpretations, dated April 22, 2016, and are binding on the CRA provided that the proposed transaction is completed within six months of the date of this letter.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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