CRA considers that a dividend distributed by a trust to a connected corporation can be subject to Part IV tax due to the delayed implied effective date of s. 104(19) designations
A dividend is received by a family trust from a Canadian-controlled private corporation with only operating assets (Opco) and immediately distributed to a corporate beneficiary (Holdco) that is connected at that time with Opco - but ceases to be connected by the end of that calendar year due to an in intervening sale of Opco by the trust. CRA considers that the trust will not enjoy the connected-corporation exemption from Part IV tax even if a timely s. 104(19) designation is made by the trust. The reason is that it considers the s. 104(19) designation to not be effective until the end of the year, at which time Holdco no longer is connected.
This is a potential trap on CCPC sales.