CRA referred to an unreported 2023 Tax Court of Canada decision (which has not been appealed), which concerned a family trust that realized a substantial capital gain on the disposition of small business corporation shares, paid $100,000 to each of two minor beneficiaries in the same taxation year, and claimed the deduction therefor pursuant to s. 104(6)(b) – notwithstanding that the trust deed prohibited any distributions to designated persons in respect of the father. CRA denied the s. 104(6)(b) deduction for the two payments, and considered that they should be included in the minors’ income pursuant to s. 105(1) rather than s. 104(13).
Hogan J found that if an amount cannot be paid under the terms of a trust it cannot be considered to be payable, so that the denial of the deductions was confirmed.
CRA considers that this decision is consistent with its position in 2005-0159081I7, including that in determining whether an amount is payable for the purposes of s. 104(6), it must first be determined whether the amount is payable under the provincial law, i.e., without regard to any ITA provision.