CRA indicates that s. 105(1) can apply to the benefit arising from a trust paying the premiums on a policy owned by a corporation even though that corporation was not a trust beneficiary

A discretionary Ontario trust owns a life insurance policy on the life of Mrs. A, for which the Trust pays the insurance premiums (as authorized under the Trust indenture), and for which Mr. B (who is one of the trust beneficiaries) is the beneficiary.

CRA indicated that, if the insurance premiums were not paid as a distribution of trust capital to Mr. B, or as a payment of income included in computing his income, it appeared that, by the Trust paying the premiums on the policy for which Mr. B was the beneficiary, it could be considered that the Trust conferred a benefit on Mr. B, equal to the premiums paid, which would be included in Mr. B’s income under s. 105(1), irrespective of whether the premiums were paid out of the trust’s capital or income.

If this scenario were varied so that Mr. B was the shareholder of Opco (which, unlike Mr. B, was not a Trust beneficiary) and it was Opco who was the beneficiary of the policy, CRA considered that s. 105(1) could also apply to Opco, even though Opco was not a beneficiary of the Trust. This was so since s. 105(1) refers to the value of all benefits to a taxpayer from or under a trust, with there being no requirement in s. 105(1) that the taxpayer receiving the benefit from the trust be a beneficiary of the trust. Accordingly, similarly to the first scenario, it could be considered that the trust conferred a benefit on Opco by paying the policy premiums on a policy for which Opco was the beneficiary.

Neal Armstrong. Summary of 5 May 2026 Roundtable, 2026-1089321C6 - 2026 CALU – Q.3 under s. 105(1).