2022 Trust Forum Presentations

WHAT IS THE INCLUSION RATIO? • IR = 1 – GST Exemption Allocated/Value of the Property Transferred. • Example 1 ‒ Parent gives $10M to a trust for child, remainder to grandchild. ‒ Parent causes $10M of GST exemption to be allocated to the trust. ‒ SO: IR = 1 – (10M/10M) = 0. • Example 2 ‒ Parent gives $10M to a trust for child, remainder to grandchild. ‒ Parent has no GST exemption left, so none is allocated to the trust. ‒ SO: IR = 1 – (0/10M) = 1.

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WHAT IS THE INCLUSION RATIO? • Example 3

‒ Parent gives $10M to a trust for child, remainder to grandchild. ‒ Parent causes $5M of GST exemption to be allocated to the trust. ‒ SO: IR = 1 – (5M/5M) = ½. When calculating GST: GST = Taxable Amount x (40% x IR).

• If IR = 0, the GST is imposed at 0% on the Taxable Amount (40% x 0 = 0%). • If IR = 1, the GST is imposed at 40% on the Taxable Amount (40% x 1 = 40%). • If IR = ½, the GST is imposed at 20% on the Taxable Amount (40% x ½ = 20%).

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