CRA rules on the s. 107(2) rollout of taxable Canadian property by a non-resident former s. 75(2) trust to its corporate beneficiary

CRA ruled that the s. 107(2) rollover applied to the distribution by a non-resident trust, to which s. 94(8.2) (effectively, s. 75(2)) no longer applied because its settlor had been dissolved, of Canadian rental property to its sole beneficiary, which was a (presumably non-resident) corporation related to the Canadian-resident lessee of the property. The stated purpose of the distribution was to avoid the application of the 21-year rule in s. 104(4) to the property, which had a significant accrued capital gain and recapture. No representation was made that the settlor was not wound-up for the purpose of permitting the accessing of the rollover.

CRA also ruled that mortgage debt, and unsecured debt owing to a group “Finco,” that was assumed on the distribution, qualified as an amount payable for the property by the beneficiary for purposes of s. 20(1)(c)(ii).

Neal Armstrong. Summaries of 2016 Ruling 2016-0635051R3 under s. 107(2) and s. 20(1)(c)(ii).