This is the second part of a series on trusts and the association rules. The first part appeared in the May 2026 issue of Canadian Tax Focus. The second part addresses how the rules can apply. Divorced Spouses Divorced spouses…
Allegation of Sham Trust Allocation
In Fiducie Famille Champoux c Agence du revenu du Québec, 2026 QCCQ 2430, Revenue Quebec had alleged a sham where a trust allocated to a beneficiary $800,000 of a $950,000 gain realized on the sale of shares. The beneficiary’s husband…
Anti-Avoidance for the 21-year rule
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…
Contributions to a testamentary trust
Contributions to an estate or testamentary trust (in this article, an “estate” for short) by anyone other than the testator can vitiate the estate’s status as such. See paragraph 108(1) “testamentary trust” (b) of the Income Tax Act (Canada). Such…
Post-mortem bumps and grandchildren
The bump under ITA paragraph 88(1)(d) could be denied if a “specified shareholder” receives bumped property unless the shareholder was also a “specified person” as defined in paragraph 88(1)(c.2). Grandchildren who receive bumped property could taint the bump if they…
Post-mortem bumps and capital dividends paid from life insurance
Bump room is determined by the ACB of the target corporation’s shares minus the net tax cost of the underlying assets and the amounts in ITA subparagraph 88(1)(d)(i.1), which include taxable dividends and capital dividends. Accordingly, a target corporation that…
Vefghi appeal allowed
The Federal Court of Appeal has allowed the Crown’s appeal and dismissed the cross-appeal of one of the taxpayers in Vefghi Holding Corp. v R, 2023 TCC 135, which I discussed here. See R v Vefghi Holding Corporation, 2025 FCA…
Trust reporting rules under the August 2024 draft legislation
The following seems to capture the logic of the trust reporting rules, as amended by the August 12, 2024, draft legislation, including the rules that will apply to “bare trusts” for years ending after December 30, 2025. Is the arrangement…
2024 STEP Roundtable Part 2
In response to question 10, the CRA referred to Maurice Kissel Family Trust v R (unreported 2019-4092(IT)G). The trust in question prohibited the distribution of amounts to a “designated beneficiary”, but the trust purported to allocate and deduct gains it…
Trust allocations
Fiducie Historia c HMK, 2024 CCI 76 (French only), affirmed the validity of trust allocations made by trustees where, the CRA alleged, another agreement (entered into to preserve capital losses in a corporation controlled by the trust) seemed to give…