Participating shares of Opco were issued to a discretionary trust ("Trust") as part of an estate freeze, and Opco then paid a dividend to the Trust. The Trust indenture contemplated that subsequently created corporations could become capital and income beneficiaries. Prior to December 31 of the same year, the Trust incorporated a corporation Newco, which became a beneficiary of the Trust, with the Trust then allocating and paying the dividend in that year to Newco. CRA stated:
Since the dividend income paid by Opco to the Trust in a taxation year of the Trust was paid by the Trust to Newco before December 31 of that year, the Trust would normally be entitled to deduct the amount paid under subsection 104(6) for that taxation year.