Some points of interest from a recent CRA technical interpretation (2017-0683021I7, June 8, 2018) respecting a reorganization involving a trust with non-resident beneficiaries: The trustees of a trust purported to add a ULC as a beneficiary. The CRA, however, noted…
Dividends to a trust and Part VI.1 tax
Opco wishes to redeem low-low preference shares held by a family trust, which proposes to allocate the resulting deemed dividend to a beneficiaryco (Benco). Will Part VI.1 tax apply to Opco? If the preference shares are subject to a price…
Suspended losses and trust winding-up
Amanda Laren, in “Gap in Subsections 40(3.3) and (3.4) for Wound-Up Trust?” Canadian Tax Focus 9:2 (May 2019), notes that Subsections 40(3.3) and (3.4) stipulate whether the two parties remain affiliated after the transferor is dissolved or wound up, but only if…
212.1 look-through and trusts
Section 212.1 of the Income Tax Act (Canada) is an anti-avoidance rule that applies in circumstances similar to those for section 84.1. With section 212.1, however, only PUC (and not ACB) is relevant as far as the subject shares are…
Trust allocations gone awry
Unfortunately, taxpayers sometimes play fast and loose with the legalities surrounding family trusts. Sometimes trustees purport to make allocations of income from a trust to its beneficiaries. The beneficiaries treat the amounts allocated as income for the purposes of the Income Tax Act (Canada) (the “Act”). The allocated amounts, however, somehow end up in the hands of other individuals, often the parents of the beneficiaries in question. The parents are often also the trustees of the trust who made the allocations (fiduciary obligations be damned).
Distribution of gains from a trust
Unfortunately, taxpayers sometimes play fast and loose with the legalities surrounding family trusts. Sometimes trustees will purport to make distributions from a trust to its beneficiaries. The beneficiaries treat the amounts received as income for tax purposes, but then those…
Trusts and deemed income
Greg A. Leslie, “Trusts — Be Mindful of Allocating Deemed Income!”, Tax Hyperion 13:11 (November 2016) summarizes CRA technical interpretation 2015-0604971E5 (October 19, 2016). How does a trust allocate a deemed gain under s 48.1 of the Income Tax Act…
Trust that avoids 21-year rule subject to GAAR
An inter vivos trust is approaching its 21-year anniversary. Before the anniversary, the trust distributes property under 107(2) to Canco, a corporate beneficiary, which is wholly-owned by another inter vivos trust. The other trust was just formed, and so it…
Important safety tip
Neal Armstrong alerts us to a nasty trap. Suppose Opco pays a dividend to a trust-shareholder, which immediately distributes an amount to Holdco, a beneficiary of the trust. Suppose that the trust then sells its shares of Opco, before the…
Estates vs Trusts Coda
As a coda to my article on “trusts vs estates”, I offer the following from Chow and Pryor, Taxation of Trusts and Estates (Toronto: Carswell, 2016) at 9.2.2(c)(ii): The residue is not ascertained until the debts and other liabilities of…