Could specified beneficiaries renounce their beneficial interest in the trust immediately prior to the sale and thus not be affected by the exemption claimed by the trust? CRA responded:
[I]f a personal trust designates a residence as a principal residence for a particular year, it is the specified beneficiaries in the calendar year ending in the particular year that will be affected by paragraph (f) of the Definition and who will have the consequences for that calendar year ending in the year.
Consequently, a (legally valid) renunciation by certain beneficiaries in respect of their beneficiary rights in the trust that would be made immediately prior to the sale of the residence by the personal trust and that would be effective only from that time would not avoid the consequences provided for in paragraph (f) of the Definition.