Words and Phrases - "beneficiary"
20 June 2023 STEP Roundtable Q. 4, 2023-0968111C6 - Trust Reporting – Definition of Beneficiary
Pursuant to Reg. 204.2(1)(a), a trustee of a trust is required to report information about each “beneficiary” of the trust, unless the trust is subject to one of the exceptions in s. 150(1.2) or an exception in s. 204.2(2) applies. CRA was asked to comment on the meaning of “beneficiary” in the context of a query about a “disaster clause” for a family trust providing that in the event that none of the parents and their issue survived, the assets of the trust are to go to extended family members (“contingent beneficiaries”). CRA indicated that, very generally, a beneficiary of a trust is a person, other than the protector, who has the right to compel the trustee to properly enforce the terms of the trust, regardless of whether that person’s right to the income or capital of the trust is immediate, future, contingent, absolute or conditional on the exercise of the discretion of any person – so that, accordingly, a beneficiary in the ordinary sense would include a beneficiary whose interest is contingent.
CRA also noted that, under Reg. 204.2(2), where the person’s identity is not known or ascertainable, then sufficiently detailed information is required to be included in the return so that it can be determined with certainty whether a particular person is a beneficiary of the trust.
15 June 2021 STEP Roundtable Q. 7, 2021-0879021C6 - Subsection 107(2)
Having regard to the approaching 21-year anniversary, the trustees of a resident discretionary family trust of which only the children are beneficiaries decide to distribute the trust property to a newly created trust which has been settled for the benefit of the children. CRA found that the transfer of the trust property to the new trust would not occur on a s. 107(2) rollover basis.
Without referencing Propep, it indicated that the term “beneficiary” in s. 107(2) included a person "beneficially interested" in the trust, which term was defined in s. 248(25) and that, in order for a person to be beneficially entitled under s. 248(25)(a) on the basis of having any right “as a beneficiary under the trust to receive any income or capital of the particular trust,” the person must have that right as a beneficiary.
Since the trust agreement did not include a trust for the benefit of the children (nor contemplate any such trust as a future beneficiary), s. 107(2) would not apply on the transfer of property from the trust to the new trust, which was not a “beneficiary.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) | a trust with children beneficiaries could not roll-out property under s. 107(2) to a trust for the benefit of those children | 271 |
Canada v. Propep Inc., 2010 DTC 5088 [at at 6882], 2009 FCA 274
The taxpayer was owned by another corporation (9059) which, in turn, was owned by a Quebec trust whose first-ranking beneficiary was 9059, and second-ranking beneficiary was the son of an individual who controlled two other corporations with which CRA had found the taxpayer was associated. It was accepted that the taxpayer would be so associated if the son was deemed by s. 256(1.2)(f)(ii) to own 9059.
Although the discretion conferred on the trustees to distribute capital to the son could not be exercised before the winding-up of 9059 or the expiration of 100 years, the trustees could in exercising their discretion and at the time of their choosing wind up 9059, thereby making the son the sole beneficiary. Accordingly, the son was deemed by s. 256(1.2)(f)(ii) to own 9059. In addition, he was an income beneficiary, and under the Act an income beneficiary was treated as a beneficiary of the trust. Finally, he was a beneficiary under the expanded definition of "beneficially interested" in s. 248(25). In this regard, Noël JA stated (at paras. 23-24) after referring to s. 248(25)(a):
The TCC judge seems to be of the opinion that this definition does not apply here because the expression "beneficially interested" is not used in either of the provisions dealing with associated corporations (256(1)( c ), 256(1.2) and 256(1.3))... . With respect, the expression "beneficially interested" does not have to be reproduced in each provision where it is likely to be applied. This concept applies each time the question arises whether a person is "beneficially interested" in a particular trust. A person who has a contingent right to the capital or income of a trust is "beneficially interested" for the purposes of the Act.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Income Interest | 28 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(25) | potential beneficiary was a beneficiary | 284 |