CRA indicates that a trust’s distribution of a corporation to an individual beneficiary would trigger a loss restriction event unless all 3 trustees were related to such beneficiary

Would a loss restriction event occur where an inter vivos discretionary trust with three trustees distributes a corporation to an individual as beneficiary?

CRA indicated that, in the absence of evidence to the contrary, it would presume that all of the trustees would constitute a group controlling the corporation. In this case, there would be a loss restriction event unless the individual beneficiary was related to each of the three trustees immediately before the distribution of the shares.

CRA did not unpack this further, but presumably it considered that, even if unusually the corporation should be considered to have been controlled by only two of the trustees (A and B) who were related to each other as well as to the beneficiary (C) and the third trustee (X) was unrelated, C would necessarily be considered to be acquiring the shares from all three trustees and, thus, acquiring those shares (in part) from an unrelated person (X).

Neal Armstrong. Summaries of 17 June 2025 STEP Roundtable, Q.11 under s. 256(7)(a)(i)(A) and Interpretation Act, s. 33(2).