CRA finds that the majority-interest beneficiary of a discretionary trust was not affiliated with a subsidiary of the trust

To focus on the most informative scenario, an individual (“A”), who was a majority-interest beneficiary of a discretionary trust, thus was affiliated with the trust pursuant to s. 252.1(1)(g)(i). The trust held 80% of the common shares of Bco (which had only one class of shares) and A held the other 20%. A was the sole trustee.

Would A and the trust form an affiliated group of persons by which Bco was controlled such that Bco was affiliated with A pursuant to s. 251.1(1)(b)(ii)?

CRA (which indicated that it would restrict its remarks to matters of de jure control) noted that, pursuant to s. 251.1(4)(a), reference to a trust does not include a reference to the trustee. Accordingly, it was the trust alone that had de jure control of Bco, such that the trust and Bco were affiliated. Since Bco was controlled by a single person (the trust), in accordance with the Southside principle (which in this context had not been overridden by a provision like s. 256(1.2)(b)), it could not be said that Bco was controlled by a group of persons consisting of A and the trust.

This would suggest, for instance, that a sale by Bco to A would not be subject to the suspended loss rules.

Neal Armstrong. Summary of 2 December 2025 CTF Roundtable, Q.8 under s. 251.1(1)(b)(ii).