Mr. A is one of the two trustees for an inter vivos trust for his minor children that provides for the distribution of all income to the beneficiaries, with the trust electing under s. 104(13.1). Mr. A voluntarily pays the income taxes owed by the trust.
Does s. 105(1) (or any other provision) apply to tax the beneficiaries on the income taxes paid by the trustee personally? After indicating that s. 105(1) did not apply, CRA stated:
[I]t should be noted that the amount of tax paid by Mr. A does not represent income on which a taxpayer would have been taxed if he had received it directly. Therefore, the beneficiaries would not be taxed on the amount of tax paid by Mr. A under subsection 246(1).