On the sale of a property at fair market value to a bona fide third party outside the ordinary course of the vendor's business, does the deemed trust under ss. 227(4) and (4.1) only to the proceeds of disposition and not to the sold property? CRA stated:
In broad terms, a deemed trust established under those provisions ceases to apply to property of a tax debtor when the tax debtor disposes of the property in the normal course of business for FMV consideration to an arm's length bona fide purchaser. That position is supported in particular by the Supreme Court of Canada in First Vancouver Finance.
…However, the deemed trust also applies to property held by a secured creditor within the meaning of subsection 224(1.3) which, in the absence of a security interest within the meaning of that subsection, would be that of the tax debtor. In that regard … the scope of the deemed trust cannot be limited by the fact that a secured creditor could in certain circumstances be equated with a third party purchaser.