CRA further confirms that a qualifying s. 94(2)(t) sale of Canadian shares effects an immediate change in trust residency

We have published the questions that were posed to CRA at the 7 June 2019 STEP CRA Roundtable, together with abbreviated summaries of the CRA oral responses.

If a non-resident trust is "tainted" as a resident trust under s. 94(2)(g) by being issued shares by a resident corporation, it potentially can re-acquire non-residency status under s. 94(2)(t) if it makes a qualifying sale of the shares. When this occurs, it changes its status immediately, so that it is non-resident for the stub period beginning with the sale, is resident for the stub period before the sale, and has a potential deemed disposition of its property under the emigration rule (s. 128.1(4)) as a result of the status change.

2013-0509111E5 confirmed the above results. However, 2018-0781041I7 essentially amended 2013-0509111E5 by expunging a confusing paragraph that suggested that for certain purposes the trust remained a deemed resident until year end. In response to Q.1 posed at the STEP Roundtable, CRA noted that the comments in that paragraph considered what would happen hypothetically “in the absence of s. 94(5),” and that such conclusions were not applicable to the actual state of the law. Thus, the sale triggers the change back to non-resident status for all relevant purposes.

Neal Armstrong. Summary of 7 June 2019 STEP CRA Roundtable, Q.1 under s. 94(2)(t).