When the taxpayer discovered that his mother and father had established a trust in his favour and that they were about to complete the sale of the principal asset of the trust, he sued the trustees. A week later, the action was settled by one of the trustees agreeing to pay him two lump sums in consideration for a release.
Bonner TCJ. found that the settlement gave rise to a disposition by way of sale pursuant to s. 107(1) rather than representing a distribution of property (i.e., the cash) pursuant to s. 107(2). Bonner TCJ. stated (at p. 1218):
"The word 'distribute' in the context of subsection 107(2) refers to an allotment of trust property to a beneficiary in accordance with his proportionate share ... . The Appellant's father demanded and received consideration as provided in the form of the deed of release and disclaimer ... . The transaction was, quite simply, a sale."