An alter ego trust receives the dividend income which became payable to the lifetime beneficiary (primary beneficiary) in the post-2015 year of death to which s. 104(13.4) applied. In connection with agreeing that the alter ego trust is entitled to a deduction under s. 104(6)(b) for the amount of dividend income received by it that was made payable to the primary beneficiary prior to the death, CRA discussed the effect of B in the formula limiting the deductible amount as follows:
[E]lement B of the formula restricts the deduction available to the trust as follows:
- for the trust’s year in which the primary beneficiary dies and prior years, clause (i)(A) of the description of element B ensures that no deduction may be made by the trust for income which became payable to a beneficiary other than the primary beneficiary, and
- for the trust’s year in which the primary beneficiary dies, subclause (i)(B)(I) ensures that no deduction is available to the trust in respect of any amount included in the trust’s income because of the application of subsections 104(4) to (5.2) (the “deemed disposition rules”) or subsection 12(10.2) of the Act.