CRA indicated that 2016-0669301C6 and 2017-0693321C6 dealt with an abusive circumvention of s. 104(5.8) through a s. 107(2) rollout 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 rolling out under s. 107(2) property that was not taxable Canadian property to a newly-formed Canadian corporation which was a corporate beneficiary. The GAAR Committee reviewed a similar distribution by a Canadian resident discretionary trust, but with the distributed property, namely, shares of a private Canadian real estate corporation, being taxable Canadian property (TCP) that did not come within the carveouts to s. 107(5) (principally, property described in ss. 128.1(4)(b)(i) to (iii).)
The Committee recommended that GAAR be applied to that distribution on the basis that, even though the distributed property was TCP, it was not the type of property that was specifically carved out in s. 107(5). Such transfer was considered as 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).