The question described a situation where most of the income generated by a discretionary family trust was generated from investments made out of the proceeds of a loan made to the trust by Mr. X at the prescribed rate of interest and pursuant to a written loan agreement, and then asked whether s. 75(2) would apply if Mr. X was a beneficiary or the sole trustee of the trust. CRA responded (TaxInterpretations translation):
Provided that the loan made by Mr. X to the trust is, in accordance with the true legal relationship between the parties, legally a loan rather than a contribution of capital to the trust, the fact that Mr. X was a beneficiary or a trustee of the trust, as the case may be, would not be itself result in the application of subsection 75(2).