Principal Issues: In a situation where an individual transfers capital property to a trust governed by the Civil Code of Quebec, the individual is one of the co-trustees and the sole beneficiary of the trust and the trustees have discretion with respect to the timing of payment of the income and distribution of capital of the trust (1) whether the transfer of property would not result in a change in the beneficial ownership of the property as required by paragraph 107.4(1)(a)? (2) whether subsection 73(1) would not apply to the disposition as required by paragraph 107.4(1)(i)?
Position: (1) Yes. (2) Yes.
Reasons: (1) A discretionary power of the trustees with respect to the timing of payment of the income and distribution of capital to the beneficiary would not result, in and of itself, in a change in the beneficial ownership of the property for the purposes of paragraph 107.4(1)(a) as long as the beneficiary is, after the transfer of the property to the trust, the only person who is beneficially interested in the trust within the meaning of subsection 248(25). (2) If the trustees of a trust may, under the terms of the trust agreement, restrict the payment to the beneficiary of any portion of the trust's income, the beneficiary is not "entitled to receive" all the income of the trust within the meaning of subsection 73(1)(c)(ii). Therefore, subsection 73(1) would not apply to the disposition, as required in subsection 107.4(1)(i).
