April 2009


For income tax purposes, trusts are generally deemed to dispose of their capital property every 21 years following their creation, resulting in the realization of accrual gains and losses. Given the recent financial crisis and its negative financial implications, the value of common shares of an operating corporation that is owned by a trust may have a nominal value at this time. However, this situation may be beneficial for a trust who wishes to avoid the 21 year deeming rule.