Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Transfers or loans to a trust

• 74.3 (1) Where an individual has lent or transferred property (in this section referred to as “lent or transferred property”), either directly or indirectly, by means of a trust or by any other means whatever, to a trust in which another individual who is at any time a designated person in respect of the individual is beneficially interested at any time, the following rules apply:

  • (a) for the purposes of section 74.1, the income of the designated person for a taxation year from the lent or transferred property shall be deemed to be an amount equal to the lesser of

    • (i) the amount in respect of the trust that was included by virtue of paragraph 12(1)(m) in computing the income for the year of the designated person, and

    • (ii) that proportion of the amount that would be the income of the trust for the year from the lent or transferred property or from property substituted therefor if no deduction were made under subsection 104(6) or (12) that

      • (A) the amount determined under subparagraph 74.3(1)(a)(i) in respect of the designated person for the year

      is of

      • (B) the total of all amounts each of which is an amount determined under subparagraph 74.3(1)(a)(i) for the year in respect of the designated person or any other person who is throughout the year a designated person in respect of the individual; and

  • (b) for the purposes of section 74.2, an amount equal to the lesser of

    • (i) the amount that was designated under subsection 104(21) in respect of the designated person in the trust’s return of income for the year, and

    • (ii) the amount, if any, by which

      • (A) the total of all amounts each of which is a taxable capital gain for the year from the disposition by the trust of the lent or transferred property or property substituted therefor

      exceeds

      • (B) the total of all amounts each of which is an allowable capital loss for the year from the disposition by the trust of the lent or transferred property or property substituted therefor,

    shall be deemed to be a taxable capital gain of the designated person for the year from the disposition of property (other than listed personal property) that is lent or transferred property.

• Definition of designated person

  (2) In this section, designated person, in respect of an individual, has the meaning assigned by subsection 74.5(5).