I-3 - Taxation Act

Section 677 Disposition versions

2015-10-21

677. Notwithstanding any inconsistent provision of this Part, the rules provided in this chapter apply to a testamentary trust.

For the purposes of this chapter, “testamentary trust”, in a taxation year, means a trust that arose upon and as a consequence of the death of an individual, including a trust referred to in section 7.4.1, but does not include

(a)  a trust created by a person other than the individual;

(b)  a trust created after 12 November 1981 if, before the end of the taxation year, property was contributed to the trust otherwise than by an individual on or after his death, and as a consequence thereof;

(c)  a trust created before 13 November 1981 if after 28 June 1982 property has been contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof, or if before the end of the taxation year, the fair market value of the property owned by the trust that was contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property exceeds the fair market value of the property owned by the trust that was contributed by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property, and for the purposes of this paragraph, the fair market value of any property shall be determined as at the time it was acquired by the trust; and

(d)  a trust that, at any time after 20 December 2002 and before the end of the taxation year, incurs a debt or any other obligation owed to, or guaranteed by, a beneficiary or any other person or partnership, which beneficiary, person or partnership is referred to in this subparagraph as the “specified party”, with whom a beneficiary under the trust does not deal at arm’s length, other than a debt or other obligation

i.  incurred by the trust in satisfaction of the specified party’s right as a beneficiary under the trust

(1)  to enforce payment of an amount of the trust’s income or capital gains payable at or before that time by the trust to the specified party, or

(2)  to otherwise receive any part of the capital of the trust,

ii.  owed to the specified party, if the debt or other obligation arose because of a service, not including any transfer or loan of property, rendered by the specified party to, for or on behalf of the trust,

iii.  owed to the specified party, if

(1)  the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,

(2)  in exchange for the payment and in full settlement of the debt or other obligation, the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the specified party within 12 months after the payment was made or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances, and

(3)  it is reasonable to conclude that the specified party would have been willing to make the payment if the specified party dealt at arm’s length with the trust, unless the trust is the individual’s succession and that payment was made within the first 12 months after the individual’s death or, if written application has been made to the Minister by the succession within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances, or

iv.  incurred by the trust before 24 October 2012 if, in full settlement of the debt or other obligation, the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the person or partnership to whom the debt or other obligation is owed within 12 months after 26 June 2013 or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances.

1972, c. 23, s. 509; 1984, c. 15, s. 152; 1986, c. 19, s. 136; 1995, c. 49, s. 154; 2009, c. 5, s. 211; 2015, c. 21, s. 220.

2009-05-15

677. Notwithstanding any inconsistent provision of this Part, the rules provided in this chapter apply to a testamentary trust.

For the purposes of this chapter, “testamentary trust”, in a taxation year, means a trust that arose upon and as a consequence of the death of an individual, including a trust referred to in section 7.4.1, but does not include

(a)  a trust created by a person other than the individual;

(b)  a trust created after 12 November 1981 if, before the end of the taxation year, property was contributed to the trust otherwise than by an individual on or after his death, and as a consequence thereof;

(c)  a trust created before 13 November 1981 if after 28 June 1982 property has been contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof, or if before the end of the taxation year, the fair market value of the property owned by the trust that was contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property exceeds the fair market value of the property owned by the trust that was contributed by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property, and for the purposes of this paragraph, the fair market value of any property shall be determined as at the time it was acquired by the trust; and

(d)  a trust that, at any time after 20 December 2002 and before the end of the taxation year, incurs a debt or any other obligation owed to, or guaranteed by, a beneficiary or any other person or partnership, which beneficiary, person or partnership is referred to in this subparagraph as the “specified party”, with whom a beneficiary under the trust does not deal at arm’s length, other than a debt or other obligation

i.  incurred by the trust in satisfaction of the specified party’s right as a beneficiary under the trust

(1)  to enforce payment of an amount of the trust’s income or capital gains payable at or before that time by the trust to the specified party, or

(2)  to otherwise receive any part of the capital of the trust,

ii.  owed to the specified party, if the debt or other obligation arose because of a service, not including any transfer or loan of property, rendered by the specified party to, for or on behalf of the trust, or

iii.  owed to the specified party, if

(1)  the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,

(2)  in exchange for the payment, the trust transfers property, the fair market value of which is not less than the principal amount of that debt or other obligation, to the specified party within 12 months after the payment was made or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances, and

(3)  it is reasonable to conclude that the specified party would have been willing to make the payment if the specified party dealt at arm’s length with the trust, unless the trust is the individual’s succession and that payment was made within the first 12 months after the individual’s death or, if written application has been made to the Minister by the succession within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances.

1972, c. 23, s. 509; 1984, c. 15, s. 152; 1986, c. 19, s. 136; 1995, c. 49, s. 154; 2009, c. 5, s. 211.

2006-03-01

677. Notwithstanding any inconsistent provision of this Part, the rules provided in this chapter apply to a testamentary trust.

For the purposes of this chapter, “testamentary trust” in a taxation year means a trust or succession that arose upon and in consequence of the death of an individual, including a trust referred to in section 7.4.1, but does not include

(a)  a trust created by a person other than the individual,

(b)  a trust created after 12 November 1981 if, before the end of the taxation year, property was contributed to the trust otherwise than by an individual on or after his death, and as a consequence thereof, and

(c)  a trust created before 13 November 1981 if after 28 June 1982 property has been contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof, or if before the end of the taxation year, the fair market value of the property owned by the trust that was contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property exceeds the fair market value of the property owned by the trust that was contributed by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property, and for the purposes of this paragraph, the fair market value of any property shall be determined as at the time it was acquired by the trust.

1972, c. 23, s. 509; 1984, c. 15, s. 152; 1986, c. 19, s. 136; 1995, c. 49, s. 154.