Nov. 16, 2015, I wrote about the ongoing saga regarding
subsection 104(13.4) and some good news that was released by the
Department of Finance. Today, the Department of Finance released legislative proposals as a follow-up and are
seeking comments on such proposals no later than Feb. 15, 2016.
While we are still absorbing some of the material, here are the
very quick observations:
New paragraph 104(13.4)(b.1) – This new paragraph
will, in effect, "turn off" the application of subsection
104(13.4) unless an election is made to have it apply under very
narrow circumstances. In plain English, if a "life interest
trust" (such as a spousal trust or alter ego trust) has a
deemed disposition of its assets because of the death of the
applicable person, then any resulting gains will now be taxed in
the trust. Without this "fix", the resulting gain would
have been taxed in the deceased's hands as I have written about
many times before. This proposed change would apply for the 2016
taxation years and forward. This is great news and I applaud the
Department of Finance for proposing this change.
Extension of time to make testamentary gifts for Graduated Rate
Estates ("GRE") – Astute readers will know
that the testamentary tax rules for charitable gifts have been
completely changed for 2016 forward. For gifts by will, one of the
effects of the new rules is that gifts made by will can be utilized
by the estate or deemed to have been made by the individual in the
year of death or the preceding year as long as the underlying
transfer of property is made to the charity during the time that an
estate is considered a GRE – no more than 36 months after the
death of the individual. The 36-month time restriction has been the
subject of a lot of criticism since it may not be a lot of time to
make the transfer of property to the charity in order to benefit
from the new gift by will taxation regime. Proposals released today
to subsection 118.1(5.1) extend the 36-month transfer restriction
to no more than 60 months. Such proposals, if passed, would apply
to the 2016 and subsequent taxation years. Again, this is welcome
There are other amendments contained in the proposals...
we'll comment on them soon after we have had a chance to
reflect. In the meantime, I again commend the Department of Finance
for listening to the tax and trust community and responding
Moodys Gartner Tax Law is only about tax. It is
not an add-on service, it is our singular focus. Our Canadian and
US lawyers and Chartered Accountants work together to develop
effective tax strategies that get results, for individuals and
corporate clients with interests in Canada, the US or both. Our
strengths lie in Canadian and US cross-border tax advisory
services, estateplanning, and tax litigation/dispute resolution. We
identify areas of risk and opportunity, and create plans that yield
the right balance of protection, optimization and compliance for
each of our clients' special circumstances.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).