CRA treats trailer fee rebate payments as trust distributions rather than inducements
31 October 2012 - 11:07am
CRA considered the payment by a mutual fund trust of rebates to a large investor equal to a proportionate part of the trust expenses used to fund the payment of trailer fees - and which the dealer in question had agreed to forego.
CRA indicated that this rebate payment generally will be treated in the usual manner as a distribution from the trust to the investor qua beneficiary - rather than as an "inducement" paid to the investor. The latter characterization, which could generally result in an income inclusion to the trust under s. 12(2.1), would have been problematic.
Neal Armstrong. Summaries of 12 October 2012 T.I. 2012-0448351E5 under s. 12(2.1) and s. 104(7.1) and summary of 16 October 2012 T.I. 2012-049061E5 under s. 104(13).