CRA indicates that the s. (g)(iv) exclusion from the indefeasible-vesting exception to the 21-year deemed disposition rule can apply to a s. 94(3) trust

Although the definition of trust in s. 108(1) generally excludes a trust from the application of the 21-year deemed disposition rule in s. 104(4) where all interests in the trust have vested indefeasibly, there are exclusions to this rule, for instance, that in s. (g)(iv) of the definition, which refers to a “trust that is … resident in Canada” where (speaking generally) one or more non-resident beneficiaries have more than a 20% FMV interest in the trust.

CRA found that the quoted wording applied to a trust that was not factually resident in Canada but was deemed to be resident in Canada pursuant to s. 94(3) – so that it would be excluded from the benefit of the indefeasible-vesting exception where, for instance, it had a U.S. resident beneficiary who was entitled to 50% of its income and capital.

Before so concluding, CRA indicated that:

• ss. 94(3)(a)(i) and (ii) provide that a deemed resident trust is deemed to be resident in Canada for purposes of applying s. 2 and for computing its income under Part I;
• the subjecting of such a trust to Part I tax on its worldwide income extended to income arising from deemed dispositions under, for instance, s. 104(4); and
• the definition of "trust" in s. 108(1) impacted the application of the deemed disposition rule in s. 104(4) so that such definition was relevant for computing the trust's income for the year.

Neal Armstrong. Summary of 2 June 2026 STEP Roundtable, Q.14 under s. 108(1) – trust – (g)(iv).