CRA confirms that an alter ego trust is entitled to a deduction for ordinary income distributions in the year of death
S. (i)(B)(I) of Element B in the formula in s. 104(6) ensures that no deduction is available to the an alter ego for any amount included in the trust’s income in the trust year ending with the death of the lifetime beneficiary because of the application of the deemed disposition rules in ss. 104(4) to (5.2). CRA agreed that, however, the alter ego trust is entitled to a deduction under s. 104(6)(b) for the amount of dividend income received by it that was made payable to that beneficiary prior to the death.
Neal Armstrong. Summary of 2 May 2018 External T.I. 2017-0717831E5 under s. 104(6)(b) – B – s. (i).