Expanded trust reporting rules apply to trusts with taxation years that end after December 30, 2023 (see VTN 504(12) and 496(1)). Reporting in respect of trusts acting as agents for their beneficiaries (referred to as bare trusts in the Department of Finance explanatory notes) is required (Subsection 150(1.3)).

A September 27, 2023 letter to CRA from the Tax Executives Institute (TEI) outlined several common business relationships that may constitute bare trust arrangements, including the following:

• Joint ventures (JVs) – JVs typically provide for one participant (the operator) to act on behalf of other participants, as the operator has expertise in a particular field. The operator typically holds legal title to development property as an agent for the benefit of other participants.

whether a partner is on title, but other partners are beneficiaries

• Partnerships – As a partnership is not a legal entity at law, a partner may hold title to the property for the benefit of the other partners.
• Real estate – Title to a property may be held by a nominee corporation for real estate development purposes.

bare trusts due to financing arrangements

Editors’ comment
An individual may be on title of a residential property for financing purposes where the beneficial owner may not otherwise be able to access a mortgage for the property.

bare trusts due to estate and probate planning

An individual may also be on title for probate and estate planning purposes and only hold the property in trust for the beneficial owner.

• Operator of resources – As most provinces do not allow taxpayers to split legal ownership of resources among multiple parties, one party may legally own the resource property in trust for the benefit of several other parties.
• Shareholder registries – Shareholder registries may not be up to date due to delays in accessing shareholder information. This may create bare trust arrangements where, for example, a dividend is paid, but the amount is held in trust until the correct shareholder information is updated and the dividend can be paid appropriately.
• Internal administrative arrangements – Certain arrangements may create a bare trust, such as where treasury and banking functions are consolidated within a single entity in a larger corporate group.

The article also cautioned that once a bare trust arrangement has been identified, the filer must determine the appropriate level at which a bare trust is constituted. For example, a joint venture may cover the beneficial ownership of several distinct assets: does the bare trust exist at the joint venture level or the individual asset level?

the number of required T3s for a single arrangement

Editors’ comment
Financial accounts where one individual holds the account “in trust for” another individual also appear to be bare trust arrangements, resulting in similar concerns. Is the bare trust on the account level, or if there are several investments within the single account, on the investment level? Further, if multiple people on title hold the assets in trust for more than one individual, is there a bare trust for each of the individuals?

In addition, many small business owners use personal, rather than commercial, bank accounts to obtain more favourable fee structures with financial institutions. Where the business is incorporated, any accounts in a shareholder’s name would also be held in a bare trust arrangement.