CRA considers using a corporate beneficiary to defer realization of s. 104(4) gain is abusive even if the gain will be realized in the lifetime of the existing beneficiaries

At the 2016 CTF Roundtable, Q.1, CRA stated that it generally would consider it to be an abusive circumvention of the rule for the realization by a trust of gains on its 21st anniversary (and of the related anti-avoidance rule in s. 104(5.8)) to distribute the property of a discretionary trust to a corporate beneficiary who was owned by a new discretionary trust. At that time, CRA indicated that it was still considering whether it would also be objectionable from a GAAR perspective if under the structure the realization of the accrued gains on the trust property would not be deferred beyond the lifetime of those who were beneficiaries at the time of the 21^st anniversary of old Trust. Thus, the the realization event, i.e. the death of the individual beneficiary, would be consistent with that achieved by a deferred rollover of property to a Canadian resident individual beneficiary pursuant to s. 107(2) (although, in fact, the trust property would continue to be held indirectly in a discretionary trust.)

CRA has now confirmed that it would consider this more limited type of deferral to also represent an abuse of s. 104(5.8) on which it would not provide a GAAR ruling.

Neal Armstrong. Summary of 13 June 2017 STEP Roundtable, Q.2 under s. 104(5.8).