20 June 2023 STEP Roundtable Q. 7, 2023-0959581C6 - Deemed Resident Trust and the Resident Portion -- summary under Paragraph 94(2)(a)

A Canadian resident beneficiary uses a residential property owned by a non-resident trust (which has made a valid (resident portion) election under s. 94(3)(f)) and pays certain expenses of the property directly. After noting that such payment of expenses constituted a contribution under s. 94(2)(a) by reason of reducing a trust liability, CRA noted that under s. (a)(ii)(A)(II) of the definition of resident portion, the trust must select property to be allocated to the resident portion having an FMV at least equal to the absolute value of the decrease in the liability or potential liability of the trust.