CRA finds that the use of a family trust to pay family expenses did not work

Father, who was the beneficiary of a Quebec family trust along with his children, distributed qua trustee the trust income to bank accounts for the children, with those amounts immediately being paid "back" to him to reimburse him for specific and "general" expenses which he had made for their supposed benefit.

Although these arrangements were less sloppy than in Degrace and Langer, CRA nonetheless found that the distributions were not income of the children as these amounts were not at their disposal, and were received by them as mandataries for him.  However, the same mandatary characterization established that the trust was entitled to a s. 104(6) deduction for the income which effectively had been distributed to him.

Neal Armstrong.  Summaries of 10 July 2013 Memo 2013-0475501I7 F under s. 104(13), s. 104(6) and s. 105(1).