2023-0968091C6 STEP 2023 – Q3 – Trust Reporting – Definition of Money and Treatment of Dividend Receivable

Principal Issues: 1) Whether settlement items such as collectible gold/silver coins and bars would be considered “money” for the purposes of paragraph 150(1.2)(b)? 2) Would the CRA treat a dividend receivable as a property listed in paragraph 150(1.2)(b)?

Position: 1) No. 2) No.

Reasons: 1) Ordinary meaning of the term "money". 2) The law.

Author: Bogdan, Aleksandra
Section: 150(1); 150(1.1); 150(1.2)(b); ITR 204.2

2023 STEP CRA Roundtable – June 20, 2023
QUESTION 3. Trust Reporting – Definition of Money and Treatment of Dividend Receivable

Pursuant to paragraph 150(1.2)(b) of the Income Tax Act (Canada) (the “Act”) (footnote 1), subsection 150(1.1) can apply to a trust for a particular tax year where, the trust holds assets with a fair market value that does not exceed $50,000 throughout the year, if the only assets held by the trust throughout the year are one or more of

(i) money,
(ii) a debt obligation described in paragraph (a) of the definition fully exempt interest in subsection 212(3),
(iii) a share, debt obligation or right listed on a designated stock exchange,
(iv) a share of the capital stock of a mutual fund corporation
(v) a unit of a mutual fund trust
(vi) an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.?1(1)?(a)), and
(vii) an interest as a beneficiary under a trust, all the units of which are listed on a designated stock exchange.

A) “Money” is not a defined term in the Act. Trusts are often settled with property such as a collectible gold or silver coin, a gold or silver bar, or other items. Can the CRA advise whether they would consider settlement items such as gold or silver coins and bars to be “money” for the purposes of paragraph 150(1.2)(b)?

B) For publicly traded securities, there is often a delay between when a dividend is declared to when it is paid. In the interim, there is a dividend receivable which may be held in a trust. Would the CRA treat a dividend receivable as a property listed in paragraph 150(1.2)(b)?

CRA Response

Part A

In general, subsection 150(1) requires taxpayers to file a return of income for each taxation year on or before a specified date or within a specified time period. Pursuant to paragraph 150(1)(c), in the case of an estate or trust, a return of income shall be filed within 90 days from the end of the year. Subsection 150(1.1) provides exceptions, subject to subsection 150(1.2) (footnote 2), to the filing requirements in subsection 150(1).

Subsection 150(1.2) operates in a manner that limits the exceptions in subsection 150(1.1), such that the filing requirements in subsection 150(1) may continue to apply if the trust is resident in Canada and is an express trust, or for civil law purposes a trust other than a trust that is established by law or by judgement, unless the trust is a trust described in any of paragraphs 150(1.2)(a) to (o).

The exception in paragraph 150(1.2)(b) applies where a trust holds assets with a total fair market value that does not exceed $50,000 throughout the year, if the only assets held by the trust throughout the year are comprised of one or more of the assets as described in subparagraphs 150(1.2)(b)(i) to (vii), as listed above. Overall, if a particular trust meets this exception, or one of the other exceptions listed in subsection 150(1.2), subsection 150(1) will not apply where the trust also meets one of the exceptions in subsection 150(1.1). The trust will also not be required to provide the additional information set out in section 204.2 of the Income Tax Regulations.

The asset listed in subparagraph 150(1.2)(b)(i) is money. Since the term “money” is not defined in the Act, we must look to the ordinary meaning of the term for guidance. The Black’s Law Dictionary, 11th edition, defines money as “the medium of exchange authorized or adopted by a government as part of its currency.” The Oxford English Dictionary, 3rd electronic edition, defines money as “any generally accepted medium of exchange which enables a society to trade goods without the need for barter; any objects or tokens regarded as a store of value and used as a medium of exchange.”

In Moss v. Hancock (1899) 2 Q.B. 116, the court stated that “Money as currency is that which passes freely from hand to hand throughout a community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it to any other use than in turn to tender it to others in discharge of debts or payment for commodities”.

In our view, collectible gold or silver coins, and gold or silver bars do not fit within the ordinary meaning of money. We have previously taken the view that gold coins are likely to be commodity purchases. Generally, collectible gold or silver coins, and gold or silver bars would not serve as a medium of exchange in a financial transaction in the same manner as, for example, the Canadian dollar.

As a result, a trust that is in possession of either a collectible gold or silver coin, or a gold or silver bar, will not be able to satisfy the exception in paragraph 150(1.2)(b). Therefore, if a trust is resident in Canada and is an express trust, or for civil law purposes a trust other than a trust that is established by law or by judgement, it will be subject to the filing requirements in subsection 150(1) unless one of the other exceptions described in subsection 150(1.2) is satisfied.

Also, note that pursuant to subsection 150(1.4), for greater certainty, subsections (1.1) to (1.3) do not require the disclosure of information that is subject to solicitor-client privilege.

Part B

The assets listed in subparagraphs 150(1.2)(b)(i)-(vii) do not explicitly include dividend receivables. Moreover, given the types of assets that are listed in those subparagraphs, we cannot reasonably conclude that a dividend receivable would be treated as one of those properties. As a result, if a trust holds an asset that is not listed under subparagraphs 150(1.2)(b)(i)-(vii), such as a dividend receivable, the exception in paragraph 150(1.2)(b) would not be applicable.

Aleksandra Bogdan
2023-096809

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 Unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.

2 Note that subsection 150(1.2) is applicable for taxation years ending on or after December 31, 2023.

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© His Majesty the King in Right of Canada, 2023

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté le Roi du Chef du Canada, 2023