CRA confirms the application of s. 75(2) to a trust settled by an Indian band

An Indian band received a milestone payment under an agreement with a resource company in respect of the use of lands, which it settled on a new trust of which it was the sole beneficiary. The band settled a trust with the milestone payment. Most of the milestone payment would then be distributed on an equal per capita basis to the band members (but with minors not receiving until they attained 18).

CRA ruled that s. 75(2) would attribute any income, from the investment by the trust of the non-distributed portion of the milestone payment, to the Indian band. However, any income generated from reinvested income would not be subject to s. 75(2) – but the trust would be entitled to a s. 104(6) deduction for the distribution of such income, which was payable annually to the band. In this regard, the trust would annually issue a promissory note to evidence any income that was payable in the year but not yet distributed. There was no apparent concern about a promissory note being issued to a non-legal entity (the band).

Finally, the CRA ruled that the per capita distribution of most of the milestone payment would not be income from a source to the band members.

Neal Armstrong. Summary of 2025 Ruling 2024-1042991R3 under s. 75(2).