CRA indicates that accrued income under a segregated fund is not a right or thing

In light of s. 138.1(1)(f), the taxable income of a related segregated fund trust is deemed for the purposes of computing the income of the trust and beneficiaries under ss. 104(6), (13) and (24) to have been payable in the year to the beneficiaries, with the allocation amongst them to be determined by reference to the terms and conditions of the policy. (There is a similar rule in s. 138.1(3) for capital gains.)

CRA made the point that this is tax law, not real law. In fact, the beneficiaries generally have no entitlement to enforce payment to them of the accruing income. In particular having regard to the CRA view that “to be a right or thing [under s. 70(2)] … the individual would have to be legally entitled to receive the amount at the time of the individual’s death (the right would have to exist)” CRA considered that even though an individual annuitant who died part way through the year was allocated the income that had been earned in the year up to the time of death on the T3 slip received by his executors, he had no legal entitlement to the allocated amounts. Hence, such income was not rights or things, so that it could not be included on a separate s. 70(2) return.

Neal Armstrong. Summary of 8 October 2021 APFF Financial Strategies and Instruments Roundtable, Q.10 under s. 138.1(1)(f).