Your friend Andrew has heard that you are studying Canadian income taxation. He has heard people
discussing something called the '21-Year Rule' with regard to trusts. He has come to you with
questions regarding this rule, since his father recently established inter vivos trusts for both Andrew and his mother.
Required:
Briefly answer the following questions:
With regard to non-spousal trusts:

Question

Quizplus · Accepted Answer

The Answer is A)The 21 Year Rule prevents trusts from escaping tax on specific types of property held for long periods of time.
B)The specific properties of the trust are deemed to be sold and reacquired at their market values, realizing tax gains and losses on the deemed disposition.
C)Capital properties (non-depreciable), depreciable properties, land that is inventory, and resource property are subject to the 21 Year Rule.
D)Properties can be transferred to the beneficiaries prior to the 21st anniversary, at their tax cost, thereby deferring the tax effects.
E)Spousal trusts are exempt from realizing a deemed disposition of the properties at the first 21 Year anniversary.

Your Friend Andrew Has Heard That You Are Studying Canadian