An Opco (“Camions”) was owned by family trusts for two brothers (Alain and Régis Dubois). After Alain decided to retire, it was agreed that Alain's family trust would sell its shares in Camions to a newly-formed company for Régis' two sons. Alain agreed to the stipulated sale price on the basis that the gain would be eligible for the enhanced capital gains exemption.

CRA subsequently assessed the transaction on the basis that s. 84.1 applied. In particular, a joint holding company of Alain and Régis (“Gestion”) that was a beneficiary of the trust, did not deal at arm’s length with the nephew’s company. Accordingly, since based on s. 251(1)(b), a person (Gestion) not dealing at arm’s length with the nephews’ company was a trust beneficiary, the sale to the nephew’s company was deemed to be between persons not dealing at arm’s length.

Before confirming the retroactive effect (to immediately before the sale) of the trustees’ written determination to remove Gestion as a beneficiary of the trust, Bélanger JCS stated:

The removal of Gestion was an implicit obligation under the trust agreement, as it … was required to ensure that the sale price of the shares complied with the agreement between Alain and Régis.

Without this implicit obligation, there would be a gap in the contract: the parties agreed that Alain must benefit from the capital gains deduction for him to sell his shares, but they failed to explicitly provide for an essential condition to achieve this agreement, namely removing Gestion from the list of beneficiaries of the Trust so that the proceeds from the sale were eligible for the capital gains deduction. Characterizing the removal of Gestion as an implicit obligation does not add to the contract concluded between the parties. It merely fills the gap in its explicit content due to the nature of the contract agreed upon by the parties.

This sounds like an approach that should have been available in the common-law provinces …

Neal Armstrong. Summary of Dubois v. Dubois, 2026 QCCS 3550 under General Concepts – Rectification.

The applicant (Lobsinger) stated:

• on June 16, 2017 the trustees of the Lobsinger Family Trust resolved that the trust property and all interests in it would vest equally among the three beneficiaries of the trust (who were Lobsinger’s children) before the trust's 21st anniversary on October 31, 2017;
• subsequently, on October 10, 2017, a majority of the trustees confirmed that the vesting would take effect on October 15, 2017; and
• Lobsinger then instructed counsel to prepare documentation to evidence this decision - but it was not prepared until after CRA commenced its audit, in 2019.

CRA reassessed on the basis that the trust realized a gain on its 21st anniversary. An appeal to the Tax Court had been held in abeyance to allow Lobsinger to bring this application: he sought a declaration that the trust property and all interests in the trust property vested indefeasibly on October 15, 2017 and, alternatively, sought an order vesting the trust property and all interests in it equally among the beneficiaries of the trust, nunc pro tunc, as of October 15, 2017.

In declining to exercise jurisdiction over this application, Brookes J stated:

Where a provincial Superior Court has concurrent jurisdiction with the Tax Court, it should exercise that jurisdiction only over issues that are ancillary, rather than fundamental, to the tax proceeding … .

The issue of whether the Trust property vested indefeasibly on October 15, 2017, is neither subordinate nor incidental to the reassessment. It is the central issue in the ongoing Tax Court appeal.

Neal Armstrong. Summary of Lobsinger v Lobsinger Family Trust, 2026 ABKB 671 under ITA s. 171.

This morning's release of four severed letters from the Income Tax Rulings Directorate is now available for your viewing.

The Benoît Trottier Family Trust realized a capital gain of $950,000 in 2014, which was eligible for the enhanced capital gains exemption. The trust purported to distribute funds equal to that capital gain on December 29, 2014 to two beneficiaries (the wife and mother of Mr. Trottier). The ARQ denied the deduction claimed by the trust under the Quebec equivalent of ITA s. 104(6) and added $950,000 to Mr. Trottier's income pursuant to the Quebec equivalent of s. 105(2). In confirming these assessments and finding that the purported distribution was a sham as Mr. Trottier retained control of the funds at all times and, several months later, used them to acquire securities in his brokerage account, Riverin JCQ stated:

Here, there was no actual distribution, as the beneficiaries did not receive the amounts and had no control over them. Mr. Trottier did not relinquish these amounts. In reality, the "beneficiaries" did not derive any easily realizable economic value from them.

The preponderant evidence demonstrates that Mr. Trottier and the Trust claimed to distribute an amount of $950,000 to Ms. Perrault and Ms. Sauvageau, but this was not the case. This transaction was designed and carried out to disguise the reality and deceive the tax authorities, as Mr. Trottier retained control over this amount.

Neal Armstrong. Summary of Trottier v. Agence du revenu du Québec, 2026 QCCQ 4372 under s. 104(24).