The taxpayer was owned by another corporation (9059) which, in turn, was owned by a Quebec trust whose first-ranking beneficiary was 9059, and second-ranking beneficiary was the son of an individual who controlled two other corporations with which CRA had found the taxpayer was associated. It was accepted that the taxpayer would be so associated if the son was deemed by s. 256(1.2)(f)(ii) to own 9059.
Although the discretion conferred on the trustees to distribute capital to the son could not be exercised before the winding-up of 9059 or the expiration of 100 years, the trustees could in exercising their discretion and at the time of their choosing wind up 9059, thereby making the son the sole beneficiary. Accordingly, the son was deemed by s. 256(1.2)(f)(ii) to own 9059. In addition, he was an income beneficiary, and under the Act an income beneficiary was treated as a beneficiary of the trust. Finally, he was a beneficiary under the expanded definition of "beneficially interested" in s. 248(25). In this regard, Noël JA stated (at paras. 23-24) after referring to s. 248(25)(a):
The TCC judge seems to be of the opinion that this definition does not apply here because the expression "beneficially interested" is not used in either of the provisions dealing with associated corporations (256(1)( c ), 256(1.2) and 256(1.3))... . With respect, the expression "beneficially interested" does not have to be reproduced in each provision where it is likely to be applied. This concept applies each time the question arises whether a person is "beneficially interested" in a particular trust. A person who has a contingent right to the capital or income of a trust is "beneficially interested" for the purposes of the Act.