In the view of CRA, 2016-0669301C6 and 2017-0693321C6 dealt with an abusive circumvention of s. 104(5.8) through a s. 107(2) distribution by a Canadian-resident discretionary trust to a Canadian corporation whose shares were wholly owned by a newly established Canadian-resident discretionary trust; and 2017-0724301C6 dealt with the circumvention of ss. 107(5) and (2.1) by such a trust transferring, on a tax-deferred basis pursuant to s. 107(2), property that was not taxable Canadian property to a newly formed Canadian corporation which was a corporate beneficiary.
The GAAR Committee recently reviewed a similar distribution by a Canadian resident discretionary trust, but where the distributed property was taxable Canadian property (TCP) that did not come within the carveouts to s. 107(5) (being property described in ss. 128.1(4)(b)(i) to (iii) or a share of the capital stock of a non-resident-owned investment corporation). Such distributed property was the shares of a real estate corporation that thus fell within para. (d) of “taxable Canadian property” in s. 248(1).
The Committee recommended that GAAR be applied to that distribution on the basis that, even though the property that was transferred was TCP, it was not the type of property that was specifically carved out in s. 107(5). The Committee also considered that such a transfer is an abuse of ss. 107(2), (2.1) and (5). CRA noted that it would be appropriate to apply the same conclusion whether or not the transactions are undertaken to avoid the 21-year disposition rule under s. 104(4).