CRA comments included:
- Although s. 104(18) cannot apply if the trust deed provides that the portion of the capital that represents income accumulated for beneficiaries under 21 will be distributed at the discretion of the trustee “the manner in which the other portion of the capital is distributed, such as the initial capital, will have no impact on whether the conditions of subsection 104(18) are satisfied.”
- There is no obligation for the income generated by the amounts acquired by the s. 104(18) beneficiaries to accrue to their benefit, so that such “income generated may therefore be commingled with the other income of the trust and be allocated according to the provisions of the trust deed.”
- Specific clauses in the trust deed providing that certain types of payments will constitute income to the trust are acceptable - the “fact that the trust deed provides that certain types of payments will constitute income does not, in and of itself, determine whether the conditions of subsection 104(18) … are satisfied, including the condition referred to in subsection 104(18)(c).”
- Although the trustee can make choices to affect the type of income earned by the trust “once such income is earned by the trust, the trustee can have no discretion as to which beneficiary is entitled to it - but “the trust indenture may provide that income from a particular source accrues to one beneficiary rather than another, which does not, in itself, prevent the application of subsection 104(18).”
- Regarding the situation where half of the trust income is accumulated in favour of beneficiaries under the age of 21, with the share of each in that portion of the trust income being determined without the exercise trustee discretion (so that the trustee has discretion only as to the allocation of the second half of the trust income), CRA indicated respecting the first half of the income that, if its allocation to beneficiaries under the age of 21 is not dependent on the exercise or failure to exercise of a person's discretion, s. 104(18)(c) would be satisfied.
- Discretion “to pay or not to pay an amount to a third party for the benefit of a minor beneficiary out of the trust's income for the year to which the minor beneficiary is entitled at the end of the year would not, in and of itself, preclude the application of subsection 104(18) in respect of the portion of that accrued income that is not payable to that beneficiary, so long as the trustee had no discretion as to the determination of the amount of income to which the minor is entitled.”