CRA indicates that the TCC has confirmed its view that an amount paid by a trust to a beneficiary is not deductible under s. 104(6) if it was not payable under the trust deed

CRA referred to an unreported 2023 Tax Court decision (which has not been appealed) regarding a family trust that realized a capital gain, paid $100,000 to each of two minor beneficiaries in the same taxation year, and claimed the deduction therefor pursuant to s. 104(6)(b) – notwithstanding that the trust deed prohibited any distributions to designated persons in respect of the father. Hogan J found that if an amount cannot be paid under the terms of a trust it cannot be considered to be payable, so that CRA’s denial of the deductions was confirmed.

CRA considers that this decision is consistent with its position in 2005-0159081I7 that in determining whether an amount is payable for the purposes of s. 104(6), it must first be determined whether the amount is payable under the provincial law, i.e., without regard to any ITA provision.

Neal Armstrong. Summary of 4 June 2024 STEP Roundtable, Q.10 under s. 104(6)(b).