Canadian Ownership and Control Determination Regulations, 1984 (SOR/84-431)

48 Subject to section 49, in determining the classes of formal equity and the beneficial Canadian ownership of a class of formal equity of a trust, other than a unit trust, the following rules apply:

• (a) each of the following shall be a class of formal equity of the trust, consisting of 100 units:

  • (i) all interests in possession of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the income of the trust,

  • (ii) all interests in expectancy of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the income of the trust,

  • (iii) all interests in possession of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the capital of the trust,

  • (iv) all interests in expectancy of beneficiaries whose interests can be expressed in terms of a right to a certain amount or percentage of all or any part of the capital of the trust,

  • (v) all discretionary interests of beneficiaries with respect to all or any part of the income of the trust, and

  • (vi) all discretionary interests of beneficiaries with respect to all or any part of the capital of the trust;

• (a.1) where a trust demonstrates to the Minister that the beneficial Canadian ownership of a class of formal equity of the trust does not accurately represent the beneficiaries’ interests in the capital or income of the trust, or any part thereof, the Minister may adjust the beneficial Canadian ownership accordingly;

• (b) subject to paragraph (c), each beneficiary of the trust shall be deemed to own a number of units of a particular class referred to in paragraph (a) determined in accordance with the formula

  (Av/Tv) × 100,

  calculated to two decimal places where

  • (i) Av is the value of the interest of the beneficiary represented in that class, and

  • (ii) Tv is the value of all beneficial interests constituting that class;

  • c) subject to paragraph (d), the beneficial Canadian ownership of a class of formal equity that comprises discretionary interests in a trust shall be equal to the lowest Canadian ownership rate of any of the beneficiaries whose discretionary interests constitute that class determined as if the words “rounded to the nearest whole number” in section 16 read “rounded to the nearest 10th of a percentage point” and, for greater certainty, subject to paragraph (f), if such beneficiaries include a person that has or may have a Canadian ownership rate of nil, whether or not the identity of that person can be ascertained, the beneficial Canadian ownership of the class shall be deemed to be nil;

  • d) the Canadian ownership rate of a trust shall be determined without regard to the existence of any discretionary power to consume, advance, appropriate, encroach upon or otherwise dispose of all or part of the capital or income of a trust to or for the benefit of any one or more individuals who have interests in that capital or income independently of the existence of the discretionary power, if the exercise of that power is limited by a determinable standard relating to the health, education, maintenance, support or comfort of such individual or individuals;

  • e) any possibility that one or more persons will subsequently acquire interests in property of the trust at birth, on adoption or on marriage shall be disregarded;

  • f) for the purposes of paragraph (b), the value of any income right, annuity, term of years, life interest or other similar estate and of any interest in expectancy shall be determined,

    • (i) where the income right, annuity, term of years, or other similar estate or the interest in expectancy does not depend on a life contingency, on the basis of compound interest at the designated rate of interest with annual rests, and

    • (ii) where the income right, annuity, term of years, life interest or other similar estate or the interest in expectancy depends on a life contingency, on the basis of compound interest at the designated rate of interest with annual rests and the standard of mortality set out in Table I of Schedule II;

  • g) Tables II, III and IV of Schedule II shall be used as far as they may be applicable for the purpose of determining the value of any income right, annuity, term of years, life interest or other similar estate or interest in expectancy;

  • h) for the purposes of paragraphs (f) and (g), the annual income from any property shall be deemed to be the product of the designated rate of interest and the value of the property;

  • i) for the purposes of paragraph (b), where the value of any interest in a trust depends on the happening of a contingency other than a life contingency, the value of the interest shall be determined on the basis that the contingency will not occur, except that, if the Minister is satisfied that the contingency is substantially within the control of a person who is not dealing at arm’s length with a beneficiary of the trust, the value of the interest shall, if the Minister so directs, be determined as if the contingency had already occurred;

  • j) for the purposes of paragraph (b), where the value of any interest in the trust depends on the happening of a contingency that the Minister is satisfied cannot reasonably be expected to occur, the value of the interest shall be determined on the basis that the contingency will not occur;

  • k) for the purposes of paragraph (b), where the value of a particular interest in a trust depends on the death of a beneficiary before attaining such age, not exceeding 40 years, as is specified in the trust instrument, and the particular interest of the beneficiary is an interest in possession, the value of that particular interest and the value of any other interest determined with reference to the value of that particular interest shall be determined as if that beneficiary will attain the age specified in the trust instrument; and

  • l) where each of the beneficiaries in whose favour a discretionary power may be exercised has a Canadian ownership rate of 100%, the Canadian ownership rate of the trust may, if the trust so elects, be determined without regard to the existence of that discretionary power.