An individual transfers shares to a trust of which he is the trustee, and he, his wife and children are the capital and income beneficiary. Would he be able to avoid the attribution of the taxable capital gain to him under s. 75(2) (which would eliminate any ability to split the gain among the other beneficiaries so as to benefit from the capital gain deduction) by renouncing his beneficial interest in the trust's capital a few days before the sale of the shares and resigning as trustee? After noting that it “would disregard a renunciation that was not legally valid,” CRA stated:
[I]f the renunciation of trust capital was legally valid, if it was made before the exercise of the trustees' discretion and if the individual could not in any event become a beneficiary of the property or property substituted therefor (including the proceeds of disposition of the property), subparagraph 75(2)(a)(i) would no longer appear to apply, even if the individual still remained an income beneficiary (within the meaning of the civil or common law). Even if subsection 75(2) no longer applied, the attribution rules in sections 74.1 and 74.2 would have to be considered … .