CRA clarifies that a qualifying s. 94(2)(t) sale of Canadian shares effects an immediate change in trust residency

If a non-resident trust is "tainted" as a resident trust under s. 94(2)(g) by being issued shares by a resident corporation, it potentially can re-acquire non-residency status under s. 94(2)(t) if it makes a qualifying sale of the shares.  When this occurs, it changes its status immediately, so that it is non-resident for the stub period beginning with the sale, is resident for the stub period before the sale, and has a potential deemed disposition of its property under the emigration rule (s. 128.1(4)) as a result of the status change.

Although all this is clear enough after plowing through the provisions, the wording of the Finance Explanatory Notes is confusing – so that effectively CRA has issued an interpretation of the latter.

Neal Armstrong.  Summary of 24 February 2014 T.I. 2013-0509111E5 under s. 94(2)(t).