2 June 2026 STEP Roundtable, Q.5

A U.S. citizen who was non-resident in Canada contributes Canadian real property to a U.S. grantor trust under which that individual is the sole capital and income beneficiary during their lifetime, with the property to be distributed to certain family members after the individual's death.

CRA indicated that this trust, being a U.S. revocable living trust, would not be considered by it to be a bare trust, given that the beneficiaries were contingent on the death of the settlor, so that there would be a change in beneficial ownership in respect of a property transferred to it.

Accordingly, on such transfer, there would be a deemed disposition of such taxable Canadian property pursuant to s. 69(1)(b) at its fair market value. Furthermore, the non-resident would be required to follow the s. 116 requirements, and the proceeds of disposition would, for such purposes, be deemed under s. 116(5.1) to be equal to the fair market value of the contributed property.

A non-resident who is a US citizen contributes Canadian real property to a U.S. grantor trust under which that individual is the sole capital and income beneficiary until the trust property is distributed to certain family members after the individual's death. This transaction is disregarded for US purposes so that there is no disposition for such purposes.

CRA indicated that this trust, being a U.S. revocable living trust, would not be considered by it to be a bare trust, given the successive beneficial interests.

Accordingly, on its contribution, there would be a deemed disposition of the property pursuant to s. 69(1)(b) at its fair market value. Furthermore, the non-resident would be required to follow the s. 116 requirements, and the proceeds of disposition would, for such purposes, be deemed under s. 116(5.1) to be equal to the fair market value of the contributed property.