Section 108

Subsection 108(1) - Definitions

Beneficiary

Administrative Policy

19 August 1994 T.I. 941574 (C.T.O. "Definition of Beneficiary")

A properly executed release or surrender of all of an individual's interest in a trust, including any right within the meaning of s. 245(25) as...

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Capital Interest

Articles

Hayhurst, "Transactions in Income and Capital Interests in Trusts", 1988 Conference Report, c. 38

Discussion of background to introduction of personal trust rule.

Cost Amount

Administrative Policy

10 October 2014 APFF Roundtable, 2014-0538261C6 F - Disposition of capital interest/personal trust

In order to settle the capital interest in a discretionary family trust of a beneficiary who is related to the trustees, that beneficiary agrees...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) note issuance is not trust property distribution 81
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) non-deductibility on note issued to beneficiary 198

Income Interest

Cases

Canada v. Propep Inc., 2010 DTC 5088 [at 6882], 2009 FCA 274

As an individual was an income beneficiary of the trust, he was to be regarded for purposes of the Act as a beneficiary of the trust.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(25) potential beneficiary was a beneficiary 284
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.2) - Paragraph 256(1.2)(f) potential beneficiary was a beneficiary 282

Administrative Policy

Preferred Beneficiary

Administrative Policy

17 May 1994 T.I. 941128 (C.T.O. "Step-grandchild as a Preferred Beneficiary")

The word grandchild includes a step-grandchild.

Settlor

Administrative Policy

IT-374 "Meaning of 'Settlor'"

Testamentary Trust

Administrative Policy

16 December 2014 External T.I. 2014-0539841E5 F - Testamentary Trust

Would a trust created by will in favour of the child of the deceased (the "Child Trust") cease to qualify as a testamentary trust in the year of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(a) transfer from one testamentary trust to another pursuant to a will direction treated as a non-tainting contribution from the deceased 152

11 October 2013 APFF Roundtable, 2013-0493671C6 F - Testamentary trust beneficiary of inter vivos trust

When asked to confirm that 2011-0417391E5 F signified that "all the testamentary trusts which are created in the future for one of the...

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12 June 2012 STEP CRA Roundtable, 2012-0442931C6 - 2012 STEP Question 8

In the situation where the estate trustees are instructed under the Will to set up a number of trusts from the residue of the estate, CRA...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(a) trusts established out of residue 42

26 June 2012 External T.I. 2011-0417391E5 F - Bien remis à une fiducie

Where the trustees of a Quebec inter vivos trust have the power to appoint beneficiaries including a testamentary trust, does the testamentary...

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30 November 1998 External T.I. 5-982646

A trust created out of an individual's estate by a court order for the sole benefit of the mentally handicapped son of the deceased during the...

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23 February 1994 External T.I. 5-933673

The comments in IT-381R2, paragraph 21 (respecting paragraph (b)) also apply to paragraph (c) of the definition.

5 March 1991 T.I. (Tax Window, No. 1, p. 22, ¶1137)

A payment of cash to an estate to enable it to pay its liabilities is a contribution of property, which could result in the trust losing its...

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30 April 1990 Memorandum: 26 April 1990 T.I. (September 1990 Access Letter, ¶1427)

An income beneficiary may agree to pay a trust's tax liability arising from a designation under ss.104(13.1) or (13.2) without there being...

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19 April 1990 T.I. (July 1990 Access Letter, ¶1324)

After reconsidering its technical interpretation of 7 December 1989, RCT was of the view that where an income beneficiary has agreed to bear the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) 46

7 December 1989 T.I. (May 1990 Access Letter, ¶1225)

Where a beneficiary makes a payment to the trustee to enable the trustee to pay the tax liability of the trust caused by a designation under s....

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26 September 89 T.I. (February 1990 Access Letter, ¶1113)

The payment of tax on behalf of a testamentary trust potentially can convert it into an inter vivos trust.

IT-381R2 "Trusts - Deduction of Amounts Paid or Payable to Beneficiaries and Flow-Through of Taxable Capital Gains to Beneficiaries" under "Double Taxation Relief"

An income beneficiary may agree to pay a trust's tax liability arising from a designation under ss.104(13.1) or (13.2).

Articles

H. Carr, "Definition of a Testamentary Trust", Goodman on Estate Planning, Vol. VII, No. 1, 1998, p. 490.

Paragraph (b)

Administrative Policy

10 June 2016 STEP Roundtable Q. 2, 2016-0634881C6 - GRE and multiple wills

CRA’s position respecting the graduated rate estate rules, that there is only one estate, which encompasses all of the world-wide property of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Graduated Rate Estate one estate even if offshore will unknown 134

10 June 2016 STEP Roundtable Q. 1, 2016-0634871C6 - GREs and Testamentary Trusts

If the will of the deceased provides for the division of the residue into testamentary trusts (e.g., a spousal and children’s trust), the estate...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Graduated Rate Estate division of an estate into testamentary trusts may accelerate (perhaps back to inception) the demise of the estate as a GRE 449
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5.1) estate must continue to satsify the other GRE requirements following 36 mos. 132

trust

Cases

Labow v. Canada, 2012 DTC 5001 [at 6501], 2011 FCA 305

The taxpayer, who employed both his wife and two part-time employees in his medical practice, deducted $150,000 and $247,691 for contributions he...

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(g)

See Also

The Queen v. Boger Estate, 93 DTC 5276 (FCA)

Heald JA summarized followings of the trial judge (as follows at pa. 5279), which he later adopted (at p. 5281):

  1. that an interest is vested if...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(9) 277

Administrative Policy

2016 Ruling 2014-0552321R3 F - Trust to trust Transfer

A discretionary inter vivos family trust (the “Old Trust”), which was approaching its 21st anniversary and originally had been settled by a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition - Paragraph (f) para. (f) exception applied on transfer from old discretionary inter vivos family trust to new trust with terms considered to be substantively the same 782
Tax Topics - Income Tax Act - Section 74.4 - Subsection 74.4(4) having a trust interest vest indefeasibly in a minor is consistent with the minor not receiving or having any use of the trust capital 468
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(5.8) 104(5.8) applied to transfer to new trust with the same beneficiaries and essentially the same terms 51

18 December 2013 External T.I. 2011-0414841E5 F - All interests vested indefeasibly

The trust indenture of a discretionary trust will be modified for it to become a non-discretionary trust, in order to avoid the application of the...

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Words and Phrases
vested indefeasibly

30 June 1994 T.I. 9408895 ["vested indefeasibly"]

Respecting a question as to whether that all interests in a Trust had vested indefeasibly for purposes of the predecessor of para. (g), CRA...

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Subsection 108(2) - When trust is a unit trust

Administrative Policy

2015 Ruling 2015-0610391R3 - Whether 75(2) will apply to new trusts

CRA rules that s. 75(2) does not apply to trust fund where the income therefrom but not the capital can be distributed to the settlor, and no...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) 75(2) does not apply to trust fund where the income therefrom but not the capital can be distributed to the settlor, and no encroachment decision occurs during his lifetime 238

Paragraph 108(2)(a)

Administrative Policy

16 November 2015 External T.I. 2015-0595041E5 - Mutual Fund Trusts & 108(2)(a)(i)

Where a provincial securities commission has a policy on what it considers to be redeemable on demand, will CRA generally accept such policy in...

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2004 Ruling 2004 - 007431

The Class A units of a trust (the "Trust") are redeemable for the lesser of o % of their market price [over an unspecified period] and o % of the...

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16 August 2000 Ruling 2000-000751

Ruling that provision for suspension of the right of unitholders to redeem in the event that units ceased to trade by order of a competent...

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2000 Ruling 2000-004168

Ruling that a trust would satisfy the redeemable-on-demand requirements of s. 108(2)(a) where its net asset value was calculated on a monthly...

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24 December 1999 Ruling 991430

Favourable ruling where the units were redeemable for the lessor of 95% of the closing unit price on the date the units were surrendered for...

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1 January 1999 Ruling 991832

A trust would be considered to be open-ended notwithstanding that units might be redeemed for 25-year interest-bearing promissory notes rather...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 206 - Paragraph 206(1)(h) 32

1999 Ruling 991832

The only assets of an inter vivos trust (the "MFT") are (as to a cost of 85%) interest-bearing promissory notes ("First Notes") with a term of 25...

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29 September 1994 Memorandum 940941 (C.T.O. "Mutual Fund and Unit Trust")

A trust (for example, a trust whose units are traded on a stock exchange and that gives the unitholders the option of demanding redemption of the...

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28 February 1994 T.I. 940328 (C.T.O. "Real Estate Investment Trust")

Where the trustees of a REIT have the right to suspend the redemption of its units for valid reasons and such a suspension is imposed, the fund...

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11 February 1993 Memorandum (Tax Window, No. 29, p. 9, ¶2428)

The requirements of s. 108(2)(a)(i) will be considered to be met even though the administrator of the unit trust may suspend redemption of units...

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91 C.R. - Q.6

RC will not in general view a unit that is issued in accordance with the rules of securities commissions as failing to meet the requirements of s....

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22 November 89 Review Committee Memorandum (April 90 Access Letter, ¶1177)

On one occasion, the Committee had been unable to conclude that a fundamental requirement of redemption at the demand of the holder was met where...

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Articles

Allgood, "Athabasca Oil Sands Trust: Tax Implications of Royalty Trust", Corporate Finance, Vol. V, No. 1, p. 348

Includes discussion of whether a royalty interest is a "security".

Botz, "Mutual Fund Trusts and Unit Trusts: Selected Tax and Legal Issues", 1994 Canadian Tax Journal, Vol. 42, No. 4, p. 1037.

Paragraph 108(2)(b)

See Also

Shaughnessy v. The Queen, 2002 DTC 1272 (TCC)

In the context of a case dealing with whether the taxpayer had acquired an interest in a condominium unit with a reasonable expectation of profit,...

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Clevite Development Ltd. v. MNR, 61 DTC 1093 (Ex. Ct.)

Thurlow J. referred with approval to the distinction drawn in IRC v. Desoutter Brothers Ltd., [1946] 1 All E.R. 58 (C.A.) and Tootal Co. Ltd. v....

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International Brotherhood of Teamsters v. Daniel, 439 U.S. 551 (1979)

A non-contributory compulsory pension plan did not constitute an "investment contract" for purposes of the Securities Exchange Act of 1934 under...

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Re Ontario Securities Commission and British Canadian Commodity Options Ltd. (1979), 22 OR (2d) 278 (HCJ.)

The respondent sold across Canada options to purchase at a future time commodities which were traded on the London commodities market. The option...

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Pacific Coast Coin Exchange v. Ontario Securities Commission (1977), 80 DLR (3d) 529, [1978] 2 S.C.R. 112

The appellant offered bags of silver coin for sale on margin (with 85% of all margin account purchasers closing out their account without taking...

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Prather v. King Resources Co., [1973] 1 WWR 700 (Alta. C.A.)

An employee was found to have breached the condition in an employee stock option plan that "the purchase of stock thereunder shall be for...

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Canadian & Foreign Securities Co. Ltd. v. MNR, 72 DTC 6354, [1972] CTC 391 (FCTD)

Demand loans made to a company which were evidenced by unsecured promissory notes were found to be "securities" for purposes of the definition of...

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State of Hawaii v. Hawaii Market Center, Inc., 485 P. 2d 105 (1971 (Hawaii S.C.))

A member of the public, who became a "founder-member" of a retail store by purchasing either a sewing machine or a cookware set for an amount in...

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Re Peczenik's Settlement, [1964] 2 All E.R. 339 (Ch. D.)

A clause in a deed of settlement directing the trustees to hold the trust fund "for the purpose of investing such funds in any shares stocks...

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C.I.R. v. Reinhold (1953), 34 TC 389 (C.S. (1st. Div.))

Before going on to find that an admission of an intention to resell at the first opportunity did not necessarily mean that rental houses were...

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Tootal Broadhurst Lee Co. Ltd. v. I.R.C., [1949] 1 All E.R. 261 (HL)

In finding that royalties received by a manufacturer from patents which it had developed in its research department or acquired from others were...

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Words and Phrases
investments
Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Ordinary Meaning 36

Re Lilly's Will Trust, [1948] 2 All E.R. 906 (Ch. D.)

In finding that an exclusion in a bequest for "investments securities for money or leasehold property" did not include proceeds of life insurance...

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Words and Phrases
investments

In Re Power, [1947] 1 Ch. 572

A clause in a will stated that "all monies requiring to be invested under this my will may be invested by the trustee in any manner ... including...

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SEC v. Howey Co., 328 U.S. 293 (1946)

Units of a citrus grove development coupled with a contract for cultivation, marketing and remitting the net proceeds to the investor constituted...

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C.I.R. v. Desoutter Bros., Ltd. (1945), 29 TC 155 (C.A.)

Greene M.R. found that royalties derived by the taxpayer from the licensing of patents covering improvements in electrically operated hand tools...

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Words and Phrases
investments

In Re Ferry, Allen v. Allen, [1945] N.Z.L.R. 448 (S.C.)

In finding that the phrase "my investments of all descriptions" in a will did not include money on current account at a bank, Kennedy J. stated...

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Words and Phrases
investments

In re Lewis' Will Trust, [1937] 1 Ch. 118

In finding that a bequest of "the following securities (or the investments representing the same at my death if they shall have been converted...

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Khoo Tek Keong v. Ch'ng Joo Tuan Neoh, [1934] A.C. 529 (PC)

A will which empowered the trustees "to invest all monies liable to be invested in such investments as they in their absolute discretion think...

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Pennsylvania Ry. Co. v. Interstate Commerce Commission, 66 F. (2d) 37 (3d C.A. (1933))

An acquisition by one railroad company of shares in another railroad company was found not to be contrary to the Clayton Act by virtue of an...

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Words and Phrases
investments

C.I.R. v. Tyre Investment Trust, Ltd. (1924), 12 TC 646 (K.B.D.)

The taxpayer was incorporated by two individual shareholders of Dunlop Rubber Company, Limited (the "English Company") in order to acquire the...

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Wragg v. Palmer, [1919] 2 Ch. 58

A will which authorized the trustees "to invest any monies forming part of the trust estate in their names and at their discretion in or upon such...

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Words and Phrases
investing

Price v. Newton, [1905] 2 Ch. 55

In finding that a bequest of "mortgages, debentures, and other securities for money, shares, stocks, and pecuniary investments" did not include a...

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Commissioner of Taxes v. Australian Mutual Provident Society (1902), 22 N.Z.L.R. 445 (C.A.)

When the holder of a life insurance policy fell into arrears on the payment of premiums, the taxpayer was entitled to charge the cash surrender...

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Words and Phrases
investments

Worts v. Worts (1889), 18 OR 332 (Ch. D.)

A clause in a will which authorized the trustees "to invest in such securities as they shall think proper ... with power to retain any investments...

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Re Barwick, [1884] OR 710 (Ch. D.)

In finding that a deed of settlement which directed the trustee to "invest" the trust property "in such estate or securities, whether real or...

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Smith v. Smith (1876), 23 Ch. R. 114 (Ont CA)

A power in a will authorizing the trustees to "invest" certain proceeds was seen by the majority to authorize the purchase of some land adjoining...

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Archibald v. Hartley (1852), 21 L.J. Ch. 399

In finding that a will which empowered the trustees to keep the estate "invested at my decease in or upon any stocks, funds, or securities...

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Administrative Policy

2012 Ruling 2011-0429611R3 - Variation of Trust Indenture

underline;">: Overview. An open end (as described in s. 108(2)(a)) mutual fund trust (the Trust), whose units (the Units) trade on an exchange,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(7.1) addition of preferred units 287
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition reclassification of preferred REIT units 298

2012 Ruling 2011-0410181R3 - Variation of trust indenture

An open-end (as described in s. 108(2)(a)) mutual fund trust (the Trust), whose units (the Units) trade on a stapled basis with a second open-end...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(7.1) addition of preferred units with proportionate allocation of taxable income to distributions 345
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition addition of preferred units 210

15 April 2003 External T.I. 2002-016767

A mutual fund trust that is not engaged in the business of lending money or guaranteeing loans will not violate the requirements of s. 108(2)(b)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 132 - Subsection 132(6) guarantee fee may taint 61

17 March 2003 External T.I. 2001-0095675

Except where a limited partnership interest is a marketable security, the Act will look through a limited partnership to the assets held by the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 Ontario partnership debt owing to limited partner respected 309

2001 Ruling 2001 007569 [parking lots]

The operation of parking lots by a REIT will be part of the leasing and managing of its real properties and, therefore, will satisfy the...

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2000 Ruling 2000-002834

It had been accepted in a previous ruling that the holding of each of a number of foreign incorporated businesses through a separate Canadian...

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12 March 1997 TI 964172

Special warrants are not considered marketable securities.

1997 Ruling 972615 [tests applied cost amounts]

80% and 10% tests were implicitly treated as being based on relative cost amounts.

5 February 1990 TI 5-9434 [bank deposits as cash]

"Cash" for purposes of s. 108(2)(b)(iii) includes bank deposits.

26 January 1994 External T.I. 5-940116

In response to a question on whether a foreign exchange forward contract would be considered to be a marketable security, RC indicated that such a...

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13 December 1991 T.I. (Tax Window, No. 11, p. 6, ¶1538)

The activity of buying commodity futures contracts long or short is considered to be investing; and unit trusts which comply with the redemption...

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19 April 1990 T.I. (September 1990 Access Letter, ¶1444)

The lending of qualified securities pursuant to a securities lending arrangement as defined in s. 260(1) constitutes an undertaking that is...

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6 July 1989 TI 5-8243 [hedging contracts as marketable securities/use of costs rather than FMV]

"We have taken the position that a unit trust may, depending upon the facts, enter into certain hedging contracts on foreign currencies in order...

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Articles

Richards, "Real Estate Investment Trust: New Opportunities", Canadian Current Tax, July 1994, p. J. 57.

Brussa, "Creative Use of Mutual Fund Trusts and Royalty Interest as Financing Vehicles", Canadian Petroleum Tax Journal, Spring 1988, p. 35.

K.A. Lahey, "The Taxation of Securities Transactions - II: Recent Legislation", 1980 McGill Law Journal, pp. 46-81, p. 73

Discussion of the meaning of the term "security".

Subsection 108(3) - Income of a trust in certain provisions

See Also

Re Lotzkar (1985), 17 DLR (4th) 539 (BCCA)

Lambert, J.A. stated: "The question of how net income is to be calculated, for a devise of net income, depends, first, on the intention of the...

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Carver v. Duncan; Bosanquet v. Allen, [1985] BTC 248 (HL)

Although a settlor may provide that capital expenses shall or may be paid out of income, the settlor cannot alter the capital nature of those...

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Administrative Policy

26 April 2001 External T.I. 2001-007684

General discussion.

Subsection 108(5) - Interpretation

Administrative Policy

24 March 2016 Internal T.I. 2016-0634191I7 - Income from a U.S. trust

A Canadian-resident is receiving, for her lifetime, annual distributions of dividends from U.S. companies as an income beneficiary of a U.S....

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Locations of other summaries Wordcount
Tax Topics - Treaties all U.S. Treasury Technical Explanations accepted 47

Paragraph 108(5)(a)

See Also

Gilhooly v. MNR, [1945] CTC 203 (Ex Ct)

Trust amounts received by the taxpayer that had originated from mining operations were income "derived from" mining. [See also Kemp v. MNR, [1947]...

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Archer-Shee v. Baker (1927), 11 TC 749 (HL)

The taxpayer, who under the will of her father was the sole life tenant of the estate, contended that she was taxable in respect of securities...

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Subsection 108(7) - Interests acquired for consideration

Administrative Policy

11 June 2015 External T.I. 2014-0522641E5 F - Usufruct

A father, who has carried on a farming business for a number of years, grants the bare ownership of the property for consideration to his son...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Farm or Fishing Property termination of usufruct between father and son on farmland, which was a deemed trust, did not entail disposition of qualified farm property 246
Tax Topics - Income Tax Act - Section 73 - Subsection 73(3) creation of usufruct between father and son entails transfer of trust interest, not farm property 180

S6-F2-C1 - Disposition of an Income Interest in a Trust

1.3 Sometimes a person who contributes property to a personal trust, is also a beneficiary of the trust. In such situations, subsection 108(7)...

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7 January 2004 External T.I. 2003-001953

If a trust is established by contributions from two or more unrelated persons and those unrelated persons are beneficiaries of the trust, their...

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