13 June 2017 STEP Roundtable Q. 4, 2017-0695141C6 - U.S. grantor trust -- summary under Paragraph 108(5)(a)

A Canadian resident and U.S. citizen who settled a revocable living trust for him and his family, is considered for U.S. purposes to be earning the U.S.-source property income of a grantor trust directly, whereas for Canadian purposes, the trust is subject to Canadian tax on its worldwide income under s. 94(3). CRA accepted that the individual likely could generate Canadian foreign tax credits if all the trust income was distributed annually to him. In particular, the income received by him would be considered to have a U.S. source on general principles, given that s. 94(3) would not deem the trust to be resident in Canada for s. 108(5) purposes.