A spousal trust for Jocelyne (“Trust”) holds five commercial rental properties (generating $250,000 in annual rents, which had been managed by her deceased husband). Is the income generated by Trust and distributed to Jeanne subject to the tax on split income where the Trust investments are managed by: Jocelyne’s son Julien who, as the sole trustee, manages the properties (e.g., repairs, rent collections, accounts); and Julien not as trustee but as Trust employee; and Julien, as neither.
CRA noted that the net rental income distributed to Jocelyne would come within s. (c)(ii)(D) of the definition of "split income" if “it was established that Julien actively engages on a regular basis in the activities of Trust” and that it also could be included under s. (c)(ii)(D ) – except that by virtue of s. (e)(i), the distribution would be an excluded amount if it was not derived directly or indirectly from a related business in respect of Jocelyne.
However, even if the distribution were not otherwise an excluded amount, it would likely be excluded under s. 120.4(1.1)(c)(ii).