The taxpayers were private companies controlled by a resident individual (Grenon), whose RRSP (“RRSP Trust”) held 58% of the units of a publicly traded income fund (“FMO”). They engaged in a series of transactions that were intended to result in the realization by them of substantial capital gains (resulting in additions to their capital dividend accounts (CDAs), that were immediately distributed by them), followed by the realization of largely offsetting capital losses later that day. The Tax Court found that despite RRSP Trust having transferred its units of an income fund (FMO) to a newly-created income fund (TOM) and TOM in turn transferring those units to the taxpayers, beneficial ownership of those units never changed.
In overturning this finding, Monaghan JA stated (at paras. 128, 130):
The part of the trust definition relied on by the respondent that deems an agency relationship not to be a trust does not apply to a registered retirement savings plan: s. 104(1). Therefore, RRSP Trust was not a bare trust; it was a “real” trust and a separate taxpayer from Mr. Grenon. It was the beneficial owner of the RRSP FMO units, not Mr. Grenon. …
Where a trust transfers property, it is a disposition. This is true even if the transfer is to a beneficiary or another trust with identical beneficiaries: subparagraphs (e)(i) to (iii) of the definition of disposition in s. 248(1). The only exception is where legal title is transferred to a person that holds it as bare trustee and acts as agent for the owner with respect to all dealings with the property.
In finding that TOM and the taxpayers did not hold title to the RRSP FMO units as agent and nominee for the RRSP Trust, she noted that the trustee had significant powers and discretions, and that it and the appointed Agent (CIBC Wood Gundy) had not appointed TOM or the taxpayers to act as agent.