CRA maintains that s. 116 certificates are required for distributions to non-resident beneficiaries holding their capital interests as taxable Canadian property

CRA continues to maintain its long-standing policy that a non-resident beneficiary of an estate or trust whose capital interest is taxable Canadian property (e.g., where the trust held mostly Canadian real estate) is required to apply for a section 116 certificate before that interest is settled.  This position is dubious insofar as it suggests that there is a potential liability of the trustees under s. 116(5), based on the "cost" of taxable Canadian property "acquired" by them.  Trustees axiomatically do not hold beneficial interests in already-distributed trust property.

Neal Armstrong.  Summary of 29 March 2012 T.I. 2010-0385771E5 under s. 116(1).