Category Archives: 104

Testamentary Trusts Treated As One by CRA – Sas Ansari

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Testamentary Trusts Treated As One by CRA 

Evoy v The Queen, 2016 TCC 263

At issue was whether Income Tax Act subsection 104(2) applied to treat multiple trusts as one, specifically whether the second condition (the commonality of ultimate beneficiary or class of beneficiaries is met).

The court held that the assessment must occur over the lifetime of the trust, not on a year by year basis, and the group or class must be the same (and not merely that the beneficiaries in each group or class are all members of the same group or class).


The trusts were created by will in 2007. The Minister reassessed the the Appellant, treating all three trusts as one trust, and including all income in the income of the Appellant trust.

The three trusts were for the testator’s three children.  The terms of the trusts provided cross entitlements to the three children and their children (the details are found in the judgment).


The Appellant argued that the condition in paragraph 104(2)(b) is satisfied if “during the entire existence of the three trusts, the income accrues or will ultimately accrue to the same beneficiary, or group or class of beneficiaries” (para 6).  The Appellant also argued that although the income of all three trusts accrues to the same beneficiary during her lifetime, thereafter the income goes to different beneficiaries and as such the condition is not satisfied (para 6).

The Minister took the position that the treatment must occur on an annual basis to determine whether the condition is met in the particular tax year (para 7).


The Minister may treat multiple trusts as one trust for purposes of the ITA, pursuant to subsection 104(2), where the conditions are met:

 i)          substantially all of the property of each trust has been received from the same person; and

 ii)          each of the trusts is conditioned so that the income accrues or will ultimately accrue to the same beneficiary or group or class of beneficiaries.

What is the meaning to be given to “conditioned so that the income therefore accrues or will ultimately accrue to the same beneficiary or group or class of beneficiaries”?  The Court referred to the principles of statutory interpretation in Canada Trustco Mortgage Co. Ltd. v. Canada, 2005 SCC 54 at paragraph 10, and noted that the ITA is “an instrument dominated by explicit provisions dictating specific consequences, inviting a largely textual interpretation”(paras 11-12).

The Court then stated that the text of the provision appears to contemplate the consideration of the right to the income of the trust over the entire lifetime of the trust and not on the basis of each taxation year (para 14).  This conclusion was based on the words “or will ultimately accrue”, as the court did not see these words as being reconcilable with a tax-year approach (para 14).   The court also noted that an annual approach would require the court to read in words to that effect (para 15), and there is no power or discretion for the Minister to re-designate a consolidated trust as multiple trusts (para 16).

The deeming provision is found in a section that deems a trust to be an individual for the purpose of the ITA, and this does not consider an annual reconsideration (para 17). This paragraph is an exception to the general rule that each trust is a separate individual for ITA purposes  (para 18).

The purpose of 104(2) is to prevent income splitting to take advantage of the lower marginal tax rates of each testamentary trust when the income beneficiary is the same, but this has to be considered over the entire life of a trust (para 21).

The court also stated that being the part of the same family is not sufficient to meet the same group or class condition in 104(2)(b), and in this case the “none of the trusts have the same children and grandchildren of the settlor as residual income beneficiaries. In other words, the entire class of children and grandchildren are not income beneficiaries of each trust. Rather, a different part of the class is named in each of the trusts. There are no “cross-over” beneficiaries amongst the children and grandchildren of the testator in any of the three trusts. Therefore the trusts are not conditioned so that the income will ultimately accrue to the same group or class of beneficiaries.” (para 24).   The words of the provision do not support the argument that ” that it is not necessary that each trust have the same beneficiaries in each trust and that it is sufficient that the beneficiaries of each trust are members of the same group or class, I do not believe that this can be supported on the language of paragraph 104(2)(b) which refers to “the same group or class” and not to “members of the same group or class.” (para 25).

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Trustee as Legal Owner’s Withholding Responsibility s 116(5)

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Trustee as Legal Owner’s Withholding Responsibility under s 116(5)

Olympia Trust Company v The Queen, 2014 TCC 372

At issue was whether the trustee of self-directed RRSP’s is a purchaser of shares under subsection 116(5) of the ITA, requiring the trustee to either obtain a clearance certificate under section 116 or to withhold and remit the statutorily prescribed amount when shares are purchased from a non-resident vendor.

The court held that the trustee is, for purposes of section 116, the purchaser who acquires property, and is charged by that section with withholding and remitting or, absent a clearance certificate, being vicariously liable for the non-resident sellers tax payable.


The court reviewed the relevant provisions of the ITA, being:

  • The non-resident liability to tax on dispositions of taxable Canadian property – s 116(3)
  • The purchasers obligation, when purchasing taxable Canadian property from a non-resident, to withhold and remit the non-resident’s tax liability (116(5)), unless a clearance has been issued by the MNR under 116(4);
  • The definition of a trust – 104(1);
  • The joint and several, or solidary, liability along with the trust of the legal representative for amount payable under the ITA – 159(1);
  • The obligation on the legal representative to obtain a clearance certificate from the MNR before distributing property of a trust – s 215(2);
  • The personal liability of the legal representative for the amounts due under the ITA if no clearance certificate is obtained – s 215(3);
  • The definition of “disposition” to include a transfer of property to a trust – 248(1); and
  • The definition of “retirement savings plan” – 146(1).

 The court noted that with an RRSP plan is  a trust, the trustee is seized of the power to manage and dispose.  The rights of enjoyment are vested in the beneficiary annuitant.   Here, Olympia is legally seized, has title, and has control over the trust property.

For ITA purposes, subsection 104(1) is a supplementary and expansive definition of trust, and not a codification, as no definition of trust exists in the ITA Fraser v The Queen, 91 DTC 5123 at page 5127 as affirmed 95 DTC 5685 (FCA).  However, under the RRSP regime the annuitant has not right to the specific trust assets in specie but only to the wealth value of the assets once converted to cash (para 28).

Thus, the court concluded, that the non-resident disposed title of the shares to the trustee Olympia and not to the beneficiary annuitant (para 29).  Olympia, as trustee, had the power of possession, title, and management of the RRSP property, had control and possession over the monies used to make the purchase, and, in combination with the RRSP provisions of the ITA never permitting the Annuitant to become seized of the set to the extent of legal title and possession, was the only party that could be the purchaser of underlying trust property (para 30-32).  Olympia was the purchaser under 116(3).

The Court referred to Prevost Car Inc v R, 2008 TCC 231, and stated that “the true owner, where  no other party has material incidents of ownership, is a fortiori the beneficial owner” (para 33).  This was not the fact here.

Finally, the Court held that as trustee under an RRSP plan, Olympia was also the “purchaser” who “acquired” property from a non-resident for purposes of subsection 116(5).  This is independent of section 159 which deals with the personal tax liability, but rather section 116 deals with the vicarious liability of a purchaser and is both a charging provision and  a collection measure (para 39-40); RCI Trust (Trustee of) v MNR, 2009 FCA 373.

 – Sas Ansari, JD LLM PhD (exp)
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