A home or cottage is held by a trust with Mr. X and his family as well as a corporation owned by his spouse, as beneficiaries. If the trust names the corporation as beneficiary, does it lose the principal residence exemption? CRA responded:
In order for a personal trust to designate a residence as its principal residence for a year, certain conditions must be satisfied including that no partnership or corporation, other than a registered charity, is beneficially interested in the trust during the year.
Subsection 248(25) provides that a person or partnership beneficially interested in a particular trust includes any person or partnership that has any right (whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretion by any person or partnership) as a beneficiary under a trust to receive any of the income or capital of the particular trust either directly from the particular trust or indirectly through one or more trusts or partnerships.
[Thus] the corporation would be beneficially interested in any year. The personal trust would then be unable to designate the residence as its principal residence.