CRA ran through two simple numerical examples showing the somewhat contrived operation of the rules in ss. 107(2)(a) and (c), and 107(1)(a) in computing a beneficiary’s capital gain or loss on receiving a distribution of shares from the personal trust in satisfaction of the beneficiary’s capital interest. The shares had an ACB of $100,000, the beneficiary did not have an (actual) cost for that capital interest, and there was a $20,000 liability respecting of the shares satisfying the “eligible offset” definition.
CRA noted that s. 107(1)(a) deemed the ACB of the capital interest to be the $100,000 cost amount of the distributed shares for capital gains purposes, so that there was no capital gain (i.e., the deemed $80,000 proceeds of disposition of the capital interest under s. 107(2)(c), being the excess of the $100,000 cost amount of the distributed property, being their deemed cost to the beneficiary, over the $20,000 eligible offset amount) – whereas, for capital loss purposes, the ACB of the capital loss was determined as nil on ordinary principles, so that there also was no loss.
In a variant of this example, the beneficiary’s interest was previously acquired at an actual cost of $100,000, so that there is a $20,000 capital loss on the beneficiary’s capital interest, reflecting the excess of the ACB over the 107(2)(c) proceeds of disposition of $80,000.