Summary under General Concepts - Effective Date.
Principal Issues: A residence is owned by a personal trust. Three sets of assumptions are described with respect to the beneficiaries of the trust and with respect to the person inhabiting the house.
1) The first issue concerns the determination of the persons who are the specified beneficiaries for the purposes of the designation provided for in paragraph (c.1) of the definition of principal residence in section 54.
2) The second issue concerns the impact of the designation (that is made by a personal trust) of a residence as a principal residence on the possibility by a specified beneficiary to claim the principal residence exemption with respect to his own residence.
3) The third issue is whether a renunciation by specified beneficiaries to their capital or income rights under the trust (that would be done immediately before the sale of the residence by the personal trust) would allow them to claim their own principal residence exemption.
Position Adoptée: 1) A specified beneficiary is described in subparagraph (c.1)(ii) of the definition of principal residence in section 54. Without the review of the trust deed in a particular situation and without the complete information on the persons who may inhabit the residence owned by the trust rent-free, no definitive conclusion can be reached with respect to the specified beneficiaries. Subsection 248(25) provides an inclusive definition of "beneficially interested".
2) Where a trust designates its residence as a principal residence for a particular year (assuming that the conditions to do so are met in that particular year), that residence will be deemed to have been property designated by each specified beneficiary of the trust for the calendar year ending in the particular year and the specified beneficiaries of the trust will not be allowed to designate another residence in that calendar year.
3) The renunciation would have to be legally valid. However, if the renunciation takes effect immediately before the sale of the residence by the personal trust, that renunciation would not allow a specified beneficiary to designate another residence in the previous calendar years assuming that the personal trust has designated a residence for those previous years. In our view, to make a designation with respect to a particular year, the conditions of the designation have to be met in that particular year.
Raisons: In compliance with the provisions of the Act.