Where a corporation with an October 31 year end receives income distributions from an income trust in February and March 2007 and sells its units in April 2007, the distributions so received by it will reduce the adjusted cost base of its units because the corresponding income allocated to it by the income fund will not be included in its income until its October 31, 2008 taxation year, i.e., at the time of the disposition of the units it was not the case that the amount of the distributions "was included in the taxpayer's income" (s. 53(2)(h.1)(A)).
In light of the provision in s. 39(1)(a) that a capital gain will not include an amount otherwise included in income, the corporation at the time of filing its 2008 return (in which it includes the distributions in income under s. 104(13)) will be able to refile ints 2007 return to reduce the capital gain reported in that return.