Principal Issues: (1) Would CRA consider any contributor to a trust as a “settlor” for the purposes of the definition “controlling persons” in subsection 270(1)? (2) In a hypothetical scenario where an underlying discretionary trust made distributions to the top discretionary trust in a particular calendar year, would CRA consider the discretionary beneficiaries of the top discretionary trust to be controlling persons of the underlying discretionary trust in that year? (3) In the same hypothetical scenario, if the underlying discretionary trust made a distribution to the top discretionary trust in a particular calendar year and the top discretionary trust made distributions to its discretionary beneficiaries in that same year, would the answer be the same?
Position: (1) It is a question of law to be determined in light of the relevant facts and circumstances; (2) A distribution from the underlying discretionary trust to the top discretionary trust would not result in the discretionary beneficiaries of the top discretionary trust becoming controlling persons in respect of any of the discretionary trusts; (3) A distribution to the top discretionary trust and a distribution from the top discretionary trust to its discretionary beneficiaries in the same year would result in the discretionary beneficiaries of the top discretionary trust becoming controlling persons in respect of both trusts in that calendar year.
Reasons: (1) Prior position; (2) Interpretation of law; (3) Interpretation of law and the Common Reporting Standard.
