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. In order to avoid the attribution of the 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, the individual may renounce his beneficial interest in the trust's capital a few days before the sale of the shares and resign as trustee. After discussing the potential for a valid renunciation to avoid the application of s. 75(2), CRA addressed queries as to any application of s. 56(2) or 56(4), and as to whether the renunciation gave rise to proceeds of disposition, and stated:
[I]f the renunciation of the trust's capital was legally valid and was not made to any person, the disposition of the individual's capital interest would not give rise to any tax consequences since the proceeds of disposition would be nil. Furthermore, it is our view that subsections 56(2) and (4) would not apply to such a valid renunciation made before the exercise of the trustees' discretion.