In the course of a general discussion of when a graduated rate estate might be subject to tax on income that was not considered to be payable in the year in the context of its executor's year policy, CRA stated:
The Department of Finance’s Explanatory Notes indicate that subsection 104(13.3) ensures that subsection 104(13.1) or (13.2) designations “are made only to the extent that the trust’s tax balances (e.g., loss carry-forwards) are applied, under the rules that apply in Division C, against all of the trust’s income for the year determined after the trust claims the maximum amount deductible by it under subsection 104(6).” Therefore, where an estate’s taxable income would be greater than nil after a subsection 104(13.1) or (13.2) designation is made, subsection 104(13.3) will render the designation invalid. Subsection 104(13.3) may impact the ability to make a subsection 104(13.1) or (13.2) designation in any year of the estate.