A non-income producing property of a trust, such as a cottage or boat, is used by a beneficiary, a person related to a beneficiary or by a person unrelated to the beneficiary (Mr. X). The Directorate indicated that:
- CRA generally does not assess a s. 105 benefit arising from the use of the personal-use property by a beneficiary or person related to the beneficiary – but this administrative position would not extend to use of the property by an unrelated person, who would be required to include a benefit under s. 105(1) based on rent for comparable property, less any consideration paid for the use of the property (subject to the comments in IT-432R2, para. 11 as to computation of the benefit).
- If it is an expense incurred as a result of owning the property, for example, interest, payment of the expense would not necessarily be a benefit to the user of the property since even if the user had not used the property, the trustee would have had to pay the expense. However, payment of an expense incurred as a result of occupancy such as electricity, heating, and certain maintenance costs would represent a taxable benefit under s. 105(1).
- If the deed of trust directs the trustee to pay expenses as a distribution of capital to the user of the property who would then be a beneficiary of the trust, there would be no s. 105(1) benefit.
- In a variation of these facts, if the trust holds a home or cottage in trust for beneficiaries including a corporation owned by Mr. X’s spouse, and that property is made available to the corporation’s shareholder, CRA indicated that the benefit question turned on whether (i) the trust specifically granted a right to use the property to the corporation, with such newly-created property then being distributed for not consideration by the corporation its shareholder without consideration, or (ii) the trust allowed the shareholder to use the property held by the trust. In the second case, there would be no benefit under s. 15(1), and also no benefit under s. 105(1) given that the shareholder was related to a beneficiary – whereas, in the first case, there could be a s. 15(1) benefit conferred by the corporation.