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Bare trusts are common in high-end residential and commercial property deals in B.C. A Transparency International report in 2016 found a third of the “100 most valuable residences in Metro Vancouver were held through shell companies.” Some real-estate insiders say the majority of major B.C. real-estate purchases occur through trusts or companies.

The trust arrangements, drawn up by legal specialists, make it possible for wealthy investors to avoid paying, for instance, the roughly $75,000 in B.C. property transfer taxes that should normally go to the government during the purchase of a house valued at $3 million.

The bare-trust loophole also makes it relatively easy for non-residents of Canada to sidestep the 15-per cent tax on foreign buyers in Metro Vancouver, which the B.C. government instituted in the summer of 2016, says immigration lawyer Sam Hyman.

In addition, foreign speculators in B.C. can use trust companies to hide that they are not residents of Canada, since their names or migration status are not known to B.C.’s Land Title office, Hyman said.

As a result, people who control “shares” in a bare trust can avoid paying capital gains taxes to the Canada Revenue Agency on the profits they make selling investment properties, which, unlike principal residences, are not exempt.

If B.C. had followed the lead of Ontario and closed the bare-trust loophole, Hyman said, it would have “caught all of the shenanigans” exposed in this month’s B.C. Supreme Court case, known as Zu versus Zhu, in which two families from China together purchased three expensive houses in Vancouver using trusts and proxies to avoid taxes.