A trust receives a deemed dividend under 84(2) or 84(3) of the Income Tax Act as on account of capital for trust law purposes. The trust pays the cash received for the “dividend” to a capital beneficiary. The CRA agrees that the amount became payable to the beneficiary for the purposes of 104(6) and (13).
84(1) income or FAPI are “phantom income”. The CRA stated that, in order for such income to be treated as payable to a beneficiary, the trust deed must specifically permit an amount equal to the phantom income to be paid to the beneficiaries or provide discretion to the trustees to pay or make payable amounts defined as income under the Act.
2022 CALU conference CRA roundtable question 9 (May 3, 2022) 2022-0928891C6
