Mr. X makes a non-interest bearing loan to an alter ego trust that was established for him. The terms of the loan were established independently of those for the Trust Indenture. In finding that s. 56(4.1) would be unlikely to apply, CRA stated:
[T]he intention test in paragraph 56(4.1)(b) requires that it can reasonably be considered that one of the main reasons for making the loan was to reduce or avoid tax by causing income from the loaned property, or property substituted therefor, whose acquisition the loan enabled or assisted, to be included in the income of another individual (other than a trust). That condition of application cannot be satisfied in the hypothetical situation submitted considering that Mr. X must be entitled to receive all the income from the trust during his lifetime.