Does s. 107(2) apply where a trust distributes property to a beneficiary on condition that the beneficiary assume a debt of the trust to a financial institution? CRA responded:
Under subsection 248(1), a personal trust is defined, among other things, as a trust in which no beneficial interest was acquired for consideration payable directly or indirectly to the trust or to any person or partnership that has made a contribution to the trust by way of transfer, assignment or other disposition of property. …
The question of whether the assumption by the beneficiary of the debt of the trust constitutes consideration for the acquisition of a beneficial interest in the trust is a question of fact….
To the extent that assumption by the beneficiary of the debt does not cause the trust to lose its personal trust status and all other conditions for the application of subsection 107(2) are satisfied, the rollover under that subsection applies to the distribution of the property.