Income tax – Bare trusts and mortgages

Under s YB 21, if a person holds something or does something as a nominee (including as a bare trustee) for another person, the other person is treated as if they hold or do that thing, and the nominee is ignored for tax purposes. Where a bare trust exists, the trustee’s only duties are to transfer the trust property as the beneficiary directs and, in the meantime, to take reasonable care of the trust property. This question we’ve been asked (QWBA) considers whether a bare trust can exist where the property held has a mortgage over it.

This item replaces IS 23/02: Income tax – Application of the s CZ 39 5 year bright-line test to certain family and close relationship transactions to the extent the interpretation statement is not consistent with this QWBA. This is discussed in more detail at [19].