Would s. 75(2) apply to dividends on shares of a corporation that are subscribed for by a trust where the corporation subsequently could become a beneficiary through being named as a beneficiary under a designation pursuant to a clause in the trust indenture providing that "any corporation controlled by Individual X may become a beneficiary" of the trust? CRA responded:
[S]ubsection 75(2) should not apply where a trust subscribes for shares of a corporation for consideration equal to their fair market value ("FMV"), notwithstanding that the corporation issuing the shares is or may become a beneficiary of the trust or has any of the powers described in subparagraph 75(2)(a), notwithstanding that the corporation issuing the shares is or may become a beneficiary of the trust or has any of the rights described in subparagraph 75(2)(a)(ii) or paragraph 75(2)(b). In our view, subsection 75(2) should only apply to a person who owned the property before it was held by a trust under either of the conditions set out in subsection 75(2). Since a corporation does not own its own shares before they are issued, it follows that subsection 75(2) will not apply to a corporation that issues shares to a trust for consideration equal to their FMV.