Bill C-31 expands the scope of the anti-avoidance rule in subsection 104(5.8) so that it applies where property is transferred to a beneficiary under subsection 107(2) and “an interest, or for civil law, a right, in the taxpayer is held directly or indirectly by another trust at the particular time”. Where the rule applies, the deemed year-end of the second trust will be the earlier of its own deemed year-end and that of the transferor trust.
The scope of “interest” is unclear. It might encompass amounts loaned by a trust to a corporation. The rule will apply even if the second trust’s interest in the beneficiary has very little value.
A transaction to which subsection 104(5.8) applies remains a notifiable transaction.
Taylor Grenning and Ergi Thodhori “Trusts and the 21-Year Deemed Disposition Rules: The Evolving Reach of Subsection 104(5.8)” Canadian Tax Focus 16:3 (August 2026)
