I-3 - Taxation Act

Section 653 Disposition versions

2021-06-02

653. A trust is, at the end of each of the following days, deemed to dispose of each property of the trust (other than exempt property) that is capital property or land included in the inventory of a business of the trust and to reacquire the property immediately after that day:

(a)  the day on which

i.  the spouse of the individual who created the trust died if the terms of the deed creating it entitled the spouse to receive all of the income of the trust that arose before the spouse’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

ii.  the individual died or, if it is later, the day on which the individual’s spouse died, if the trust is a trust described in subparagraph ii of subparagraph d of the second paragraph and the terms of the deed creating it

(1)  entitled the individual to receive all of the income of the trust that arose before the individual’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(2)  entitled the individual and the individual’s spouse to receive all of the income of the trust that arose before their deaths and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust;

(a.1)  where the trust is a pre-1972 spousal trust on 1 January 1993 and the spouse referred to in the definition of “pre-1972 spousal trust” in section 652.1 in respect of the trust was, in the case of a trust created by the will of an individual, alive on 1 January 1976, and, in the case of a trust created by an individual during the individual’s lifetime, alive on 26 May 1976, the day that is the later of 1 January 1993 and the day on which that spouse dies;

(a.2)  where the trust distributes an amount in respect of a beneficiary as the beneficiary’s capital interest in the trust, it can reasonably be considered that the distribution was financed by a liability of the trust and one of the reasons for incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of an individual, the day on which the distribution is made, determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust;

(a.3)  where property, other than property described in the fourth paragraph, has been transferred by an individual after 17 December 1999 to the trust in circumstances in which section 454 applied, it can reasonably be considered that the property was so transferred in anticipation that the individual would subsequently cease to be resident in Canada and the individual subsequently ceases to be resident in Canada, the first day after that transfer during which the individual ceases to be resident in Canada, determined as if a day ends for the trust immediately after each time at which the individual ceases to be resident in Canada;

(a.4)  where the trust is a trust to which property was transferred by a taxpayer who is an individual, other than a trust, in circumstances in which sections 454 to 462.0.2 or section 692.8 applied, the transfer did not result in a change in beneficial ownership of that property and no person, other than the taxpayer, or partnership has any absolute or contingent right as a beneficiary under the trust, determined with reference to section 646.1, the day on which the taxpayer dies;

(b)  the day of the twenty-first anniversary of the latest of 1 January 1972, the day on which the trust was created and, where applicable, the day determined under any of subparagraphs a, a.1 and a.4 as those subparagraphs applied from time to time after 31 December 1971;

(c)  the day of the twenty-first anniversary of the day, other than a day determined under any of subparagraphs a to a.4, of any deemed disposition of such property under this section.

Subparagraph a of the first paragraph applies only where the trust contemplated therein is

(a)  a trust that was created by the will of an individual who died after 31 December 1971 and that, at the time it was created, was a trust described in that subparagraph a;

(b)  a trust that was created by the will of an individual who died after 31 December 1971 to which property was transferred in circumstances to which section 435 or subparagraph a of the first paragraph of section 440 applied and that, immediately after the property was indefeasibly vested in the trust as a consequence of the individual’s death, was a trust described in subparagraph a of the first paragraph;

(c)  a trust that was created after 17 June 1971 by an individual during his lifetime and that, at any time after 31 December 1971, was a trust described in subparagraph a of the first paragraph; or

(d)  a trust, other than a trust the terms of which are described in subparagraph 1 of subparagraph ii of subparagraph a of the first paragraph that elects in its fiscal return filed under this Part for its first taxation year that this subparagraph not apply, that was created after 31 December 1999 by an individual during the individual’s lifetime and that, at any time after that date, was

i.  a trust described in subparagraph a of the first paragraph, or

ii.  a trust that was created by a taxpayer who had attained 65 years of age.

However, subparagraph a of the first paragraph does not apply in respect of a trust described in subparagraph b of the second paragraph where the spouse who was the beneficiary of that trust died before 21 December 1991.

The property to which subparagraph a.3 of the first paragraph refers is

(a)  an immovable situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a capital property used in a business carried on through an establishment in Canada;

(e)  a property included in Class 14.1 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1) in respect of a business carried on through an establishment in Canada;

(f)  a property described in the inventory of a business carried on through an establishment in Canada; or

(g)   a prescribed property.

1972, c. 23, s. 489; 1977, c. 26, s. 68; 1984, c. 15, s. 138; 1986, c. 19, s. 134; 1994, c. 22, s. 225; 1997, c. 31, s. 61; 2003, c. 2, s. 157; 2004, c. 21, s. 87; 2005, c. 1, s. 128; 2009, c. 5, s. 200; 2019, c. 14, s. 170; 2021, c. 14, s. 55.

2019-06-19

653. A trust is, at the end of each of the following days, deemed to dispose of each property of the trust, other than exempt property, that is capital property, other than excluded property, and to reacquire the property immediately after that day or land included in the inventory of a business of the trust:

(a)  the day on which

i.  the spouse of the individual who created the trust died if the terms of the deed creating it entitled the spouse to receive all of the income of the trust that arose before the spouse’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

ii.  the individual died or, if it is later, the day on which the individual’s spouse died, if the trust is a trust described in subparagraph ii of subparagraph d of the second paragraph and the terms of the deed creating it

(1)  entitled the individual to receive all of the income of the trust that arose before the individual’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(2)  entitled the individual and the individual’s spouse to receive all of the income of the trust that arose before their deaths and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust;

(a.1)  where the trust is a pre-1972 spousal trust on 1 January 1993 and the spouse referred to in the definition of “pre-1972 spousal trust” in section 652.1 in respect of the trust was, in the case of a trust created by the will of an individual, alive on 1 January 1976, and, in the case of a trust created by an individual during the individual’s lifetime, alive on 26 May 1976, the day that is the later of 1 January 1993 and the day on which that spouse dies;

(a.2)  where the trust distributes an amount in respect of a beneficiary as the beneficiary’s capital interest in the trust, it can reasonably be considered that the distribution was financed by a liability of the trust and one of the reasons for incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of an individual, the day on which the distribution is made, determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust;

(a.3)  where property, other than property described in the fourth paragraph, has been transferred by an individual after 17 December 1999 to the trust in circumstances in which section 454 applied, it can reasonably be considered that the property was so transferred in anticipation that the individual would subsequently cease to be resident in Canada and the individual subsequently ceases to be resident in Canada, the first day after that transfer during which the individual ceases to be resident in Canada, determined as if a day ends for the trust immediately after each time at which the individual ceases to be resident in Canada;

(a.4)  where the trust is a trust to which property was transferred by a taxpayer who is an individual, other than a trust, in circumstances in which sections 454 to 462.0.2 or section 692.8 applied, the transfer did not result in a change in beneficial ownership of that property and no person, other than the taxpayer, or partnership has any absolute or contingent right as a beneficiary under the trust, determined with reference to section 646.1, the day on which the taxpayer dies;

(b)  the day of the twenty-first anniversary of the latest of 1 January 1972, the day on which the trust was created and, where applicable, the day determined under any of subparagraphs a, a.1 and a.4 as those subparagraphs applied from time to time after 31 December 1971;

(c)  the day of the twenty-first anniversary of the day, other than a day determined under any of subparagraphs a to a.4, of any deemed disposition of such property under this section.

Subparagraph a of the first paragraph applies only where the trust contemplated therein is

(a)  a trust that was created by the will of an individual who died after 31 December 1971 and that, at the time it was created, was a trust described in that subparagraph a;

(b)  a trust that was created by the will of an individual who died after 31 December 1971 to which property was transferred in circumstances to which section 435 or subparagraph a of the first paragraph of section 440 applied and that, immediately after the property was indefeasibly vested in the trust as a consequence of the individual’s death, was a trust described in subparagraph a of the first paragraph;

(c)  a trust that was created after 17 June 1971 by an individual during his lifetime and that, at any time after 31 December 1971, was a trust described in subparagraph a of the first paragraph; or

(d)  a trust, other than a trust the terms of which are described in subparagraph 1 of subparagraph ii of subparagraph a of the first paragraph that elects in its fiscal return filed under this Part for its first taxation year that this subparagraph not apply, that was created after 31 December 1999 by an individual during the individual’s lifetime and that, at any time after that date, was

i.  a trust described in subparagraph a of the first paragraph, or

ii.  a trust that was created by a taxpayer who had attained 65 years of age.

However, subparagraph a of the first paragraph does not apply in respect of a trust described in subparagraph b of the second paragraph where the spouse who was the beneficiary of that trust died before 21 December 1991.

The property to which subparagraph a.3 of the first paragraph refers is

(a)  an immovable situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a capital property used in a business carried on through an establishment in Canada;

(e)  a property included in Class 14.1 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1) in respect of a business carried on through an establishment in Canada;

(f)  a property described in the inventory of a business carried on through an establishment in Canada; or

(g)   a prescribed property.

1972, c. 23, s. 489; 1977, c. 26, s. 68; 1984, c. 15, s. 138; 1986, c. 19, s. 134; 1994, c. 22, s. 225; 1997, c. 31, s. 61; 2003, c. 2, s. 157; 2004, c. 21, s. 87; 2005, c. 1, s. 128; 2009, c. 5, s. 200; 2019, c. 14, s. 170.

2009-05-15

653. A trust is, at the end of each of the following days, deemed to dispose of each property of the trust, other than exempt property, that is capital property, other than excluded property, and to reacquire the property immediately after that day or land included in the inventory of a business of the trust:

(a)  the day on which

i.  the spouse of the individual who created the trust died if the terms of the deed creating it entitled the spouse to receive all of the income of the trust that arose before the spouse’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

ii.  the individual died or, if it is later, the day on which the individual’s spouse died, if the trust is a trust described in subparagraph ii of subparagraph d of the second paragraph and the terms of the deed creating it

(1)  entitled the individual to receive all of the income of the trust that arose before the individual’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(2)  entitled the individual and the individual’s spouse to receive all of the income of the trust that arose before their deaths and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust;

(a.1)  where the trust is a pre-1972 spousal trust on 1 January 1993 and the spouse referred to in the definition of “pre-1972 spousal trust” in section 652.1 in respect of the trust was, in the case of a trust created by the will of an individual, alive on 1 January 1976, and, in the case of a trust created by an individual during the individual’s lifetime, alive on 26 May 1976, the day that is the later of 1 January 1993 and the day on which that spouse dies;

(a.2)  where the trust distributes an amount in respect of a beneficiary as the beneficiary’s capital interest in the trust, it can reasonably be considered that the distribution was financed by a liability of the trust and one of the reasons for incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of an individual, the day on which the distribution is made, determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust;

(a.3)  where property, other than property described in the fourth paragraph, has been transferred by an individual after 17 December 1999 to the trust in circumstances in which section 454 applied, it can reasonably be considered that the property was so transferred in anticipation that the individual would subsequently cease to be resident in Canada and the individual subsequently ceases to be resident in Canada, the first day after that transfer during which the individual ceases to be resident in Canada, determined as if a day ends for the trust immediately after each time at which the individual ceases to be resident in Canada;

(a.4)  where the trust is a trust to which property was transferred by a taxpayer who is an individual, other than a trust, in circumstances in which sections 454 to 462.0.2 or section 692.8 applied, the transfer did not result in a change in beneficial ownership of that property and no person, other than the taxpayer, or partnership has any absolute or contingent right as a beneficiary under the trust, determined with reference to section 646.1, the day on which the taxpayer dies;

(b)  the day of the twenty-first anniversary of the latest of 1 January 1972, the day on which the trust was created and, where applicable, the day determined under any of subparagraphs a, a.1 and a.4 as those subparagraphs applied from time to time after 31 December 1971;

(c)  the day of the twenty-first anniversary of the day, other than a day determined under any of subparagraphs a to a.4, of any deemed disposition of such property under this section.

Subparagraph a of the first paragraph applies only where the trust contemplated therein is

(a)  a trust that was created by the will of an individual who died after 31 December 1971 and that, at the time it was created, was a trust described in that subparagraph a;

(b)  a trust that was created by the will of an individual who died after 31 December 1971 to which property was transferred in circumstances to which section 435 or subparagraph a of the first paragraph of section 440 applied and that, immediately after the property was indefeasibly vested in the trust as a consequence of the individual’s death, was a trust described in subparagraph a of the first paragraph;

(c)  a trust that was created after 17 June 1971 by an individual during his lifetime and that, at any time after 31 December 1971, was a trust described in subparagraph a of the first paragraph; or

(d)  a trust, other than a trust the terms of which are described in subparagraph 1 of subparagraph ii of subparagraph a of the first paragraph that elects in its fiscal return filed under this Part for its first taxation year that this subparagraph not apply, that was created after 31 December 1999 by an individual during the individual’s lifetime and that, at any time after that date, was

i.  a trust described in subparagraph a of the first paragraph, or

ii.  a trust that was created by a taxpayer who had attained 65 years of age.

However, subparagraph a of the first paragraph does not apply in respect of a trust described in subparagraph b of the second paragraph where the spouse who was the beneficiary of that trust died before 21 December 1991.

The property to which subparagraph a.3 of the first paragraph refers is

(a)  an immovable situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a capital property used in a business carried on through an establishment in Canada;

(e)  an incorporeal capital property in respect of a business carried on through an establishment in Canada;

(f)  a property described in the inventory of a business carried on through an establishment in Canada; or

(g)   a prescribed property.

1972, c. 23, s. 489; 1977, c. 26, s. 68; 1984, c. 15, s. 138; 1986, c. 19, s. 134; 1994, c. 22, s. 225; 1997, c. 31, s. 61; 2003, c. 2, s. 157; 2004, c. 21, s. 87; 2005, c. 1, s. 128; 2009, c. 5, s. 200.

2006-03-01

653. A trust is, at the end of each of the following days, deemed to dispose of each property of the trust, other than exempt property, that is capital property, other than excluded property, and to reacquire the property immediately after that day or land included in the inventory of a business of the trust:

(a)   the day on which

i.  the spouse of the individual who created the trust died if the terms of the deed creating it entitled the spouse to receive all of the income of the trust that arose before the spouse’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

ii.  the individual died or, if it is later, the day on which the individual’s spouse died, if the trust is a trust described in subparagraph ii of subparagraph d of the second paragraph and the terms of the deed creating it

(1)  entitled the individual to receive all of the income of the trust that arose before the individual’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(2)  entitled the individual and the individual’s spouse to receive all of the income of the trust that arose before their deaths and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust;

(a.1)  where the trust is a pre-1972 spousal trust on 1 January 1993 and the spouse referred to in the definition of “pre-1972 spousal trust” in section 652.1 in respect of the trust was, in the case of a trust created by the will of an individual, alive on 1 January 1976, and, in the case of a trust created by an individual during the individual’s lifetime, alive on 26 May 1976, the day that is the later of 1 January 1993 and the day on which that spouse dies;

(a.2)  where the trust designates an amount in respect of a beneficiary as the beneficiary’s capital interest in the trust, it can reasonably be considered that the distribution was financed by a liability of the trust and one of the reasons for incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of an individual, the day on which the distribution is made, determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust;

(a.3)  where property, other than property described in the fourth paragraph, has been transferred by an individual after 17 December 1999 to the trust in circumstances in which section 454 applied, it can reasonably be considered that the property was so transferred in anticipation that the individual would subsequently cease to be resident in Canada and the individual subsequently ceases to be resident in Canada, the first day after that transfer during which the individual ceases to be resident in Canada, determined as if a day ends for the trust immediately after each time at which the individual ceases to be resident in Canada;

(a.4)  where the trust is a trust to which property was transferred by a taxpayer who is an individual, other than a trust, in circumstances in which sections 454 to 462.0.2 or section 692.8 applied, the transfer did not result in a change in beneficial ownership of that property and no person, other than the taxpayer, or partnership has any absolute or contingent right as a beneficiary under the trust, determined with reference to section 646.1, the day on which the taxpayer dies;

(b)  the day of the twenty-first anniversary of the latest of 1 January 1972, the day on which the trust was created and, where applicable, the day determined under any of subparagraphs a, a.1 and a.4 as those subparagraphs applied from time to time after 31 December 1971;

(c)  the day of the twenty-first anniversary of the day, other than a day determined under any of subparagraphs a to a.4, of any deemed disposition of such property under this section.

Subparagraph a of the first paragraph applies only where the trust contemplated therein is

(a)  a trust that was created by the will of an individual who died after 31 December 1971 and that, at the time it was created, was a trust described in that subparagraph a;

(b)  a trust that was created by the will of an individual who died after 31 December 1971 to which property was transferred in circumstances to which section 435 or subparagraph a of the first paragraph of section 440 applied and that, immediately after the property was indefeasibly vested in the trust as a consequence of the individual’s death, was a trust described in subparagraph a of the first paragraph;

(c)  a trust that was created after 17 June 1971 by an individual during his lifetime and that, at any time after 31 December 1971, was a trust described in subparagraph a of the first paragraph; or

(d)  a trust, other than a trust the terms of which are described in subparagraph 1 of subparagraph ii of subparagraph a of the first paragraph that elects in its fiscal return filed under this Part for its first taxation year that this subparagraph not apply, that was created after 31 December 1999 by an individual during the individual’s lifetime and that, at any time after that date, was

i.  a trust described in subparagraph a of the first paragraph, or

ii.  a trust that was created by a taxpayer who had attained 65 years of age.

However, subparagraph a of the first paragraph does not apply in respect of a trust described in subparagraph b of the second paragraph where the spouse who was the beneficiary of that trust died before 21 December 1991.

The property to which subparagraph a.3 of the first paragraph refers is

(a)  an immovable situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a capital property used in a business carried on through an establishment in Canada;

(e)  an incorporeal capital property in respect of a business carried on through an establishment in Canada;

(f)  a property described in the inventory of a business carried on through an establishment in Canada; or

(g)   a prescribed property.

1972, c. 23, s. 489; 1977, c. 26, s. 68; 1984, c. 15, s. 138; 1986, c. 19, s. 134; 1994, c. 22, s. 225; 1997, c. 31, s. 61; 2003, c. 2, s. 157; 2004, c. 21, s. 87; 2005, c. 1, s. 128.