Subsection 74.3(1) - Transfers or loans to a trust
Joseph Frankovic, "Income Splitting and Attribution", Tax Topics, Wolters Kluwer, No. 2250, April 23, 2015
Section 74.3 is intended to ensure that the income attribution provisions cannot be avoided where the individual transfers or loans the property to a trust rather than directly to the spouse or minor child. It can apply only if income or taxable capital gains of the trust are distributed to the spouse or the minor child as beneficiary of the trust (a "designated person") and otherwise included in the designated person's income. In other words, income taxed in the trust is not caught under this provision. The income from property subject to attribution for a taxation year will generally equal the lesser of the trust income included in the designated person's income for the year and a specified proportion of the income from the property for the year (the proportion equalling the designated person's income from the trust relative to all designated persons' income from the trust for the year; see paragraph 74.3(1)(a)). The taxable capital gains subject to attribution for a taxation year will equal the lesser of the trust's taxable capital gains designated as such to the designated person as beneficiary of the trust and the net taxable capital gains realized by the trust from the disposition of the property or substituted property (see paragraph 74.3(1)(b)). Since section 74.3 applies for the purposes of sections 74.1 and 74.2, any exceptions to those provisions will apply where the circumstances warrant.
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