Consider a trust that loans money to a beneficiary, who uses the loaned funds for investment purposes. If the trust later transfers the loan to the beneficiary as a distribution of capital, it will be considered to have forgiven the…
Payment of Tax Over 10 Years for a Deceased Taxpayer
An executor can elect under subsection 159(5) to pay the tax owing under 70(2) (rights and things) and 70(5) and (5.2) (the deemed disposition on death). The election form (T2075) must be filed twice, once with the terminal return and…
Trusts and acquisitions of control
The CRA was asked to consider a situation where a trust owns all of the issued shares of a corporation. Would there be an acquisition of control in the following scenarios? The CRA reponse is given in all capitals. (a)…
Value of an interest in a discretionary family trust
Cottrell v Cottrell, 2022 BCSC 1607, is a BC family law decision, part of which addresses the value of a spouse’s interest in several discretionary trusts. Joanne was a beneficiary of family trusts established by her parents. Under BC family…
Phantom income of a trust
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…
No rollover to alter ego trust with bankruptcy provision
The CRA says that a rollover under subsection 73(1) is not available for an individual’s transfer of property to a trust supposedly governed by subparagraph 73(1.01)(c)(ii) (an “alter ego” trust) if the trust provisions prohibit the distribution of income to…
Non-resident beneficiary “roll outs”
The CRA doesn’t like it when trusts purport to roll out property to a Canadian corporation to which a non-resident beneficiary has assigned his or her capital interest. See technical interpretation 2017-0683021I7 (which I discuss here), 2021-0879021C6 and the Preston…
Shareholder loan repayment after death
In technical interpretation 2012-0442911C6 (June 2012), the CRA confirmed that subsection 15(2.6) will apply to prevent the amount of a shareholder loan from being included in the shareholder’s income if his estate repays the loan before the end of the…
Gifts by Will
S 161(7) provides that interest on taxes payable for a year should be computed without reference to any reduction of tax payable resulting from the carryback of donation credits where a gift is made in a subsequent taxation year. The…
Part IV tax and amalgamations
Benco is a beneficiary of a trust that owns all of the issued shares of each of Opco1 and Opco2. On November 30, Opco1 pays a dividend to the trust, which allocates it to Benco. Opco1 does not receive a…