Principal Issues: A testator leaves an estate, more than 50% of which is comprised of real property situated in Canada, (the testator's principal residence). The testator's will directs that on completion of the estate administration, the executors shall transfer one half of the residue, comprised entirely of cash, to a Canadian resident trust for the benefit of a non-resident beneficiary son. The estate is administered within one year of the testator's death, one half of the cash residue is transferred from the estate to Son's Trust and one year later the Trust makes a capital distribution to the non-resident son. Would the son's interest in Son's Trust be taxable Canadian property (TCP)?
Position: We would consider son's interest in Son's Trust, or son's interest in the estate, to be TCP.
Reasons: Where the transfer of the cash from the estate to Son's Trust meets all of the conditions of paragraph (f) of the definition of "disposition" in subsection 248(1) there would be no change in the beneficial ownership of the property. Subsection 248(25.1) deems Son's Trust to be the same trust and a continuation of the estate. Since the distribution of cash by Son's Trust to the son occurs within 60 months of the sale of the principal residence and the son's interest in Son's Trust is derived directly or indirectly from that real property, the 60-month look-back rule in paragraph (d) of the definition of TCP in subsection 248(1) is met. Alternatively, where the transfer of son's share of the cash from the estate to Son's Trust does not meet all of conditions in paragraph (f), we would determine whether the son's interest in the estate is TCP. Since the son's interest in the estate is derived within 60 months from the sale of the principal residence, the 60-month look-back rule is met.