A family trust paid income to the minor children in breach of a prohibition in the trust deed against making distributions to designated beneficiaries. After concluding that as the amounts were not legally payable, actually paying them did not bring them within the s. 104(6) rule, CRA went on to indicate that the distributions were be includible in the children’s income under s. 105(1) rather than s. 104(13), stating:
[P]aragraph 105(1)(b) has no application as the provision does not apply to an interest in a personal trust that has never been acquired for consideration. In our view, the value of the amount is also not included in income of the minor beneficiaries under 104(13) as discussed above.
The… amount is properly included in income under subsection 105(1), as the two exceptions to the provision are not met.