CRA confirms a full step-up of properties distributed in satisfaction of an estate’s capital interest in an inter vivos personal trust

S. 107.4(4) deems an indefeasibly-vested capital interest in an inter vivos personal trust to have a fair market value equal to a proportionate share of the trust’s net asset value. This means that where such an interest passes on death (thereby resulting in a deemed FMV cost to the estate of such interest as so computed), the estate upon receiving a distribution of trust property in satisfaction of its capital interest generally can step up the cost of such distributed property to an amount equal to such FMV.

Neal Armstrong. Summaries of 12 December 2014 T.I. 2013-0511391E5 under s. 107(2) and s. 70(5).