After having previously settled an alter ego trust whose trust deed provides that the settlor is not entitled to receive or otherwise obtain the use of any of the capital of the trust during the settlor's lifetime, that individual sells non-depreciable capital property to the trust for cash proceeds exceeding the property’s adjusted cost base.
CRA indicated that assuming that the requirements of s. 73(1) were otherwise met and that the trust deed allowed for the sale, the proceeds of disposition of the sold property would be deemed to equal the adjusted cost base of that property to the settlor immediately before the transfer, and the trust would be deemed to have acquired that property for the same amount– and that the answer would not change if the settlor subsequently gifted the cash proceeds to an adult child.
Neal Armstrong. Summary of 15 June 2022 STEP Roundtable, Q.12 under s. 73(1).