The taxpayer settled a family trust in 1992 with $5000, which was used to purchase shares in a business corporation. The family trust acquired a commercial property in 2004, and by 2013 the trust's assets were worth approximately $62 million. Because the taxpayer was a settlor, trustee and capital beneficiary of the trust, s. 75(2) applied to gains and losses from the initial $5000. Therefore, s. 107(4.1) applied to all of the trust's property, and the taxpayer could not have any trust property transferred to his children on a s. 107(2) rollover, so as to avoid a deemed disposition of the trust property in 2013 under the 21-year rule in s. 104(4). The taxpayer applied for a rectification order.
Brown J. declined to give the requested order. He stated (at para. 33):
In this proceeding the applicants bear the onus of demonstrating, on a balance of probabilities, that at the time Mr. Kanji settled the Family Trust he intended to structure the Family Trust in a tax efficient manner which would allow for a tax deferred transfer of the trust's assets to his children in the future and that a mistake was made which resulted in the trust indenture failing to give effect to that intention.
The taxpayer had not called former counsel to testify about his instructions in establishing the trust. Brown J. found that the taxpayer had not shown that his instructions to counsel had expressed such tax-deferral intentions, having said on cross-examination that he did not recall whether his instructions to "minimize tax" included instructions to defer tax.