Principal Issues: 1. Can a personal trust with multiple beneficiaries who are all beneficially interested in the trust, make a designation of a housing unit as a principal residence, where at least one, but not all beneficiaries, ordinarily inhabits the housing unit?
2. Can one of the beneficiaries of the trust who does not ordinarily inhabit the housing unit described in 1, designate another property as his/her principal residence?
3. Where a personal trust disposes of a property it owns, and designates the property as a principal residence, does the trust or the specified beneficiary declare the capital gain?
4. Does the same position as in 3. apply in respect to deemed dispositions under the 21 year rule?
1. Generally yes, provided no beneficiary that ordinarily inhabits the housing unit, nor any member of his/her extended family has designated another property as a principal residence.
2. Generally yes, provided the beneficiary owns the property, unless the beneficiary is a member of any specified beneficiary's extended family.
3. The trust, which owns the property, would generally declare the capital gain from the disposition (as reduced by any principal residence deduction), unless the capital gain was paid out to a beneficiary.
Reasons: 1. Definition of "principal residence" under section 54, in particular subparagraphs 54(c.1)(ii) and (iv).
2. Same as 1. also paragraph 54(f).
3. Same as 1, also subsections 104(13) and 104(21)
4. Subsections 104(4), 104(13) and 104(21)