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2026-11-10

Decimo Bosa Family Trust, 2026 TCC 191: a family trust that missed its own distribution date was taxed on its 21st anniversary

2026 TCC 191 · Tax Court of Canada

Provisions

ITA s. 104ITA s. 108ITA s. 38ITA s. 40

Text

Author: Sas Tullo

This is an income tax appeal about the 21-year deemed disposition rule for trusts. A British Columbia family trust settled in 1988 had a deed that told the trustees to divide the trust property among the beneficiaries by May 1, 2008. They did not. The Minister reassessed the trust for a capital gain of about $2.9 million on its 21st anniversary in February 2009, and the trust argued that a “fail-safe” clause in the deed, or the law of equity, had already moved the property out of the trust. The Crown won. The case matters to anyone with a family trust whose trustees may not have done what the deed required.

Facts

The trust was established on February 15, 1988 under British Columbia law; its 21st anniversary fell on February 15, 2009 (para 12). The beneficiaries were Decimo Bosa, his wife Valerie, and their three children; by 2007 the trustees were Mr. Bosa’s lawyer and his accountant (para 12). On February 15, 2009 the trust held legal title to the shares of two companies, one with a fair market value of $2,948,000 and an adjusted cost base of $10 (para 12).

Clause 2.01(b) defined the “Distribution Date” as the earlier of full distribution or May 1, 2008, and clause 2.03 directed that on that date the trustees “shall divide the remaining Trust Property” among the beneficiaries in their discretion (paras 18-20). Clause 2.04 provided that if “the foregoing trusts fail because no person becomes entitled at the time of division to the trust fund”, the trustees were to divide the fund among those who would have taken on Mr. Bosa’s intestacy (para 21). The trustees did not divide the assets on or before May 1, 2008 (paras 12, 23).

In 2016 the Minister reassessed the 2009 year to include an unreported capital gain of $2,947,990 with late-filing penalties and interest (para 12). Before the tax appeal was heard, the beneficiaries petitioned the British Columbia Supreme Court for rectification and vesting declarations; that court declined jurisdiction, finding that the “true purpose” of the petition was to interfere with the Tax Court appeal (paras 2-3, 5-8). The accountant-trustee had not read the indenture before becoming a trustee, and the court found Mr. Bosa’s evidence on his intentions not credible (paras 32, 40-44).

Issues

The issue was whether the trust continued to hold assets on its deemed disposition date or whether all interests had vested indefeasibly in the beneficiaries on the Distribution Date, by operation of clause 2.04 or otherwise (para 23). Within that, the court addressed the interpretation of clause 2.04, the meaning of “vested indefeasibly” in paragraph 108(1)(g), and the request that it “take notice” of what a court of equity would do (paras 52, 58, 77).

Holding

The appeal was dismissed, with costs reserved for written submissions (paras 95-96). Clause 2.04 was not engaged, because the trust did not fail for want of a person entitled; the trustees simply did not follow clause 2.03 (paras 65, 75). Even if it applied, the property had not vested indefeasibly, since the trustees retained a discretion over allocation (para 76). The Tax Court has no equitable jurisdiction and will not decide a tax appeal on a hypothetical petition in equity (paras 81-82, 86).

The court’s reasoning

Goldbach J. began with the statutory framework. Subparagraph 104(4)(b)(ii) of the Income Tax Act deems every trust to dispose of its capital property at fair market value at the end of the day that is 21 years after its creation; paragraph (g) of the definition of “trust” in subsection 108(1) excludes, for that purpose, a trust all interests in which have vested indefeasibly; and the gain is taxed under sections 38 and 40 (paras 47-50). Title and value being agreed, the only route to success was the paragraph 108(1)(g) exception (para 51). The court adopted the test applied to subsection 70(9) in Boger Estate v. Canada, [1993] 2 CTC 81 (FCA) at para 9: an interest is vested indefeasibly where there is no condition precedent, the persons entitled are ascertained, and there is no condition subsequent or determinable limitation (paras 52-54).

The appeal turned on the construction of the indenture under British Columbia law, which seeks the settlor’s intention within the four corners of the deed and admits surrounding circumstances only where the text is ambiguous (paras 58-59). Competing readings by opposing counsel are “proof of advocacy, not ambiguity” (para 59). Clause 2.03 contained a clear, mandatory direction which the trustees did not follow (paras 61-62). Clause 2.04 applies only “if” the trusts fail “because no person becomes entitled at the time of division”; that condition precedent was not met, because the trust did not fail for want of eligible beneficiaries and the only evidence was that the trustee did not distribute because he did not know he was supposed to (paras 63-66). The court accepted that clause 2.04 “would operate when the Trustees could not, rather than did not, distribute under clause 2.03” (para 69). Reading it as a general saving provision would also exclude Mr. Bosa, contrary to the deed’s stated purpose (para 70).

The court drew on the rectification cases, quoting Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56 at para 23, for the proposition that taxpayers “should not be judicially accorded a benefit based solely on what they would have done had they known better”, and Canada v. Collins Family Trust, 2022 SCC 26 at para 1 (paras 67-68). The trust was really asking for words to be read into the indenture, when the beneficiaries already had a remedy under Saunders v. Vautier that does not bind the Minister retroactively (paras 73-74).

In the alternative, even under clause 2.04 the trustees retained a discretion as to shares, so a condition precedent remained and the property had not vested indefeasibly (para 76). On equity, the Tax Court is a statutory court without inherent equitable jurisdiction, citing Hardtke v. HMQ, 2015 TCC 135, affirmed 2016 FCA 138, and Canada v. Dow Chemical Canada ULC, 2022 FCA 70 at paras 78-80 (para 81); to “take notice” of what equity would do was to do indirectly what the court cannot do directly (para 82). Courts decide on proven facts, and the strict threshold for judicial notice in Resler v. Anglin, 2026 SCC 23 at para 122, is not met by hypothetical facts (paras 86-89). The best evidence of what equity would do was what the BCSC in fact did (para 90).

Practical implications

The court noted that no reported decision had considered “vested indefeasibly” in paragraph 108(1)(g) (para 52), and it imports the Boger test without modification. Any residual trustee discretion over who takes, or in what shares, keeps the exception out of reach.

The more practical lesson is about trustee inaction. A deed that fixes a distribution date earlier than the 21st anniversary is a trap if the trustees do not act, because subsection 104(4) attaches to whatever the trust still holds, and the court will not read a contingency clause as a general cure for a missed deadline. In my view the case also confirms that a provincial court’s refusal of rectification will not be second-guessed by the Tax Court through an invitation to “take notice” of equity; the Tax Court’s lack of equitable jurisdiction is a complete answer. Costs remain to be decided (para 95).

Trustees and their advisers should read the deed and diarise both the distribution date and the 21st anniversary; once the anniversary passes with property in the trust, no later agreement among the beneficiaries will undo the tax. As the court noted from Jean Coutu Group (PJC) Inc. v. Canada (Attorney General), 2016 SCC 55 at para 43, a claim against the advisers may be the remaining remedy (para 74). Whether an appeal was taken is not verified here.

This comment is general information, not legal advice. The law may have changed since the decision; check the current text in the tax wiki.

Decimo Bosa Family Trust v. The King, 2026 TCC 191, judgment dated November 3, 2026, Goldbach J. Reasons on the Tax Court’s site. Also on CanLII. Related proceeding: Bosa v. Canada, 2025 BCSC 1284. The text of subsection 104(4) and paragraph 108(1)(g) was checked on laws-lois.justice.gc.ca on the date of this comment; section 104 carries amendments as recent as 2026, none affecting the words applied here.