2018-0744081C6 STEP 2018 - Q3 - Trust return due date on wind up

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: When is the final trust return due in the year of wind up of a personal trust?

Position: For a graduated rate estate, the final return is due 90 days from the date of wind up. For all other trusts, the final return is due 90 days from the end of the calendar year in which the wind up occurs; however, the trustee may choose to file the return early.

Reasons: The law does not allow for a trust, other than a graduated rate estate, to have a taxation year end other than a calendar year in the year of wind up.

Author: Mathanda, Tara
Section: 104(2); 249(1); 249(5); 150(1); Regulation 204

2018 STEP CRA Roundtable – May 29, 2018

QUESTION 3. Trust return due date in the year of wind up

Where a trust winds up, by distributing all of its property to its beneficiaries, does the T3 Trust Income Tax and Information Return (T3 Return) need to be filed within 90 days of the date of wind up, or does the normal (calendar) year-end govern when the tax return must be filed?

CRA Response

For the purpose of our response, we assume that you are contemplating the wind up of a personal trust.  We also note where another event occurs in the year in which the trust or estate is wound up, the other event may result in a deemed year end and the filing due date of the T3 Return would generally be 90 days after the deemed year end.

As the T3 Return is both a return of income and an information return, paragraph 150(1)(c) of the Income Tax Act (the “Act”) and subsection 204(2) of the Income Tax Regulations are relevant as both provisions require the T3 Return to be filed within 90 days from the end of the trust or estate’s taxation year.

For a graduated rate estate, paragraph 249(1)(b) defines a taxation year, for purposes of the Act, to be the period for which the accounts of the estate are made up for purposes of assessment under the Act. This combined with subsection 249(5), causes the taxation year to cease when the period of accounts end.  In the year of wind up, this would be the date of final distribution of the assets as trust law suggests that a trust may cease to exist at this point in time.

Paragraph 249(1)(c) defines, for purposes the Act, a taxation year of a trust, other than a graduated rate estate, to be a calendar year, except as expressly provided otherwise.  In the year that a trust is wound up and final distribution of assets occur, there is no provision that would cause the taxation year to be a period other than a calendar year, regardless of when the period of accounts cease.

Therefore, it is our view that the filing deadline for a graduated rate estate in the year of wind up is 90 days from the final distribution of trust assets.  For all other trusts, the filing deadline will be 90 days from the end of the calendar year in which the wind up occurs.  As the T3 Guide notes, in this case the return for the year up to the final distribution may be filed early.

 

Tara Mathanda
2018-074408

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