An individual purchased a housing unit for which he established a usufruct in favour of his parents. At all relevant times, the individual owned another housing unit, which he inhabited with his spouse and children. In order to dispose of the housing unit on which the usufruct was established to a third party, the usufructuaries renounced their right of usufruct.
CRA noted that, under s. 248(3), the “persons who have the usufruct of the property are deemed to be beneficiaries of the income of the trust while the person who has bare ownership of the property is deemed to be a capital beneficiary of the trust,” and that the renunciation gave rise to a dissolution of this deemed trust, with the result that s. 107(2) would apply to the deemed distribution of the trust property, unless an election was made under s. 107(2.01) or (2.001) in order for the trust to realize a gain for which it could claim the principal residence exemption.