An adult child, who is over 24 and a “specified individual,” receives as a beneficiary of a family trust a distribution of 10% (or 10 out of 100) of the common shares of a Canadian-controlled private corporation that, until then, was wholly owned by the trust. The child then grants his father (one of the trustees and a “source individual”) a power of attorney (POA) regarding those 10 common shares, pursuant to which the father can exercise all rights attached to those common shares except as expressly excepted. Would such a power of attorney cause the shares not to be excluded shares?
CRA responded:
Although Father may exercise the rights attached to the shares, it is our understanding that the POA would not involve a transfer of the legal or beneficial ownership of such shares to Father. Therefore, as a matter of law, and for the purposes of paragraph (b) of the definition of “excluded shares” in subsection 120.4(1), Adult Child would own the shares.