Principal Issues:
1) Will the widow be considered to have received proceeds of disposition where she releases or surrenders of an income interest in a testamentary trust and there is no direction concerning who is entitled to receive the benefit?
2) Does a variation of a testamentary trust to permit the trustees to distribute the trust property prior the application of the 21-year rule constitute a disposition by the trust or of any beneficial interest in the trust?
3) Can 107(2) be utilized on the distribution of the trust property to the Grandchildren?
Position: 1) No. 2) No. 3) Yes.
Reasons: Consistent with the Department's position in IT-385R2 and has been the subject of various rulings and opinions. Also, the variation is not of such significant nature that the Department would consider any disposition. Distribution pursuant to 107(2) consistent with Finance’s technical notes in the context of the 21-year rule.