Father, a resident Canadian, makes a loan on arm’s length terms to a factually non-resident trust for the benefit of his resident children. This loan will not be considered to be a contribution by him (so that it will not cause the trust to be resident for various purposes under s. 94(3)(a)) if it is an “arm’s length transfer,” whose definition relevantly requires that it reasonably be considered “that none of the reasons … for the transfer is the acquisition at any time by any person or partnership of an interest as a beneficiary under a non-resident trust.”
CRA indicated the quoted words did not establish a test that the beneficiary’s interest must be acquired as a result of the particular transfer, and the definition instead seeks to ensure that there is no connection between the transfer, and the person or partnership that already has (or will have) an interest in the non-resident trust.
Accordingly, it must be reasonable to conclude that none of the reasons for Father making the loan was his children being trust beneficiaries. CRA indicated that such a conclusion would be highly unlikely given his relationship to them – so that his loan would be considered to be a contribution to the trust causing him to be a resident contributor and the trust to come within s. 94(3)(a).