CRA clarifies how the equity-contribution component of the equity amount of a trust in determined for thin cap purposes

The branch of the calculation of the “equity amount” of a trust for thin cap purposes that relates to equity contributions is ambiguously worded. CRA provided a clarifying example indicating how the average equity contribution is determined:

Using the example of a calendar 2015 taxation year, this means calculating the total contributions for each of the twelve months of 2015 (i.e., the twelve calendar months that end in the year). For each of those months, the total contributions from a specified non-resident beneficiary from the creation of the trust until the end of the calendar month immediately prior to the calendar month in question would be used. Therefore, for January 2015, the total contributions would be calculated from the creation of the trust until the end of December 2014. For February 2015, it would be the contributions from the creation of the trust until the end of January 2015, and so on. The average of the twelve totals would then be calculated.

Neal Armstrong. Summary of 19 August 2016 External T.I. 2015-0585471E5 under s. 18(5) – equity amount – (b).