CRA states that only s. 74.4(2)(g) provides relief from the joint application of the TOSI and s. 74.4(2) rules

CRA rejected the proposition that the main purpose test in s. 74.4(2), and thus the rule itself, should not apply to an estate freeze transaction resulting in the family trust beneficiaries being subject to the tax on split income (TOSI) on the trust income that was distributed to them. First, CRA noted:

[T]he part of the Purpose Test related to the designated person only turns on the question of whether it is reasonable to consider that one of the main purposes of the transfer made by the individual was to benefit, either directly or indirectly, the designated person, regardless of the tax treatment to the designated person of any income that is part of the benefit the individual was seeking to confer.

Second, there was a provision (s. 74.4(2)(g)) that was intended to address the potential overlap between the two (s. 74.4 and TOSI) rules, whose narrow scope and application, CRA described as follows:

[P]aragraph 74.4(2)(g) only mitigates the impact, resulting from the application of subsection 74.4(2), on the transferring individual by reducing the amount that the transferring individual is deemed to have received as interest. That reduction is the amount to be included in computing the designated person's income for the year as a taxable dividend that the designated person received, if it is reasonable to consider that it is part of the benefit that the taxpayer sought to confer and is included in computing the designated person’s split income for any taxation year.

Neal Armstrong. Summary of 11 October 2019 APFF Roundtable, Q.16 under s. 74.4(2).