In response to a query as to whether, in the context of a fully discretionary trust where the sole trustee is also a discretionary beneficiary of the trust, s. 56(2) will apply to the trustee in respect of distributions made in favour of discretionary beneficiaries related to the trustee where no similar distribution is made to the trustee in the trustee's capacity as a discretionary beneficiary, CRA stated:
While the Supreme Court [in McClurg] has held that subsection 56(2) will not apply to the payment of dividends, this rule is not directly transferrable to the situation you have described. Whether subsection 56(2) applies will depend on a review of the facts and circumstances of each case.