2024-1005851C6 2024 CALU RT – Q12 – trust reporting - bare trusts

Principal Issues: Various questions on trust reporting regarding a bare trust.

Position: General comments.

Reasons: See below.

Author: Robinson, Katie
Section: 150, 249(1), Reg 204.2

CALU Roundtable - May 2024

Question 12 - Trust Reporting - Bare Trusts

Background

Pursuant to subsection 150(1.3) of the Income Tax Act (the “Act”) (endnote 1) , for the purposes of section 150, a trust includes “an arrangement under which a trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property” (a “bare trust”). However, pursuant to subsection 104(1), except for the purposes of certain provisions set out in that subsection, a trust is deemed not to include a bare trust unless the trust is described in any of paragraphs (a) to (e.1) of the definition of “trust” in subsection 108(1).

Pursuant to paragraph 249(1)(c), unless otherwise expressly provided, a taxation year is a calendar year.

(a) Can the CRA confirm that, while a bare trust is not a trust for most other provisions of the Act, for the purposes of complying with section 150, a bare trust will have a calendar year end?

(b) Can the CRA confirm that, if a bare trust arrangement is wound up during the year, it will have a taxation year end on December 31st of that year?

(c) Consider a situation where a corporation is incorporated solely to operate as the legal title holder of a property (“Nominee Corp”). Early in a particular calendar year, both legal and beneficial ownership of the property is sold, and Nominee Corp is liquidated and dissolved. In such a situation where Nominee Corp no longer exists, is Nominee Corp responsible for filing the T3 Trust Income Tax and Information Return (“T3 Return”), including Schedule 15, in the following year?

CRA Response

As announced on March 28, 2024, the CRA will not require bare trusts to file a T3 Return, including Schedule 15, for the 2023 tax year, unless the CRA makes a direct request for these filings.

Part (a)

Pursuant to subsection 249(1), for purposes of the Act, except as expressly otherwise provided, a taxation year is: (a) in the case of a corporation or Canadian resident partnership, a fiscal period; (b) in the case of a graduated rate estate, the period for which the accounts of the estate are made up for purposes of assessment under the Act; and (c) in any other case, a calendar year. Therefore, for the purposes of complying with section 150, a bare trust will have a calendar year end.

Part (b)

In the year that a trust, other than a graduated rate estate, 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. Therefore, it is our view that if a bare trust arrangement is wound up during the year, it will have a taxation year end on December 31st of that year. Accordingly, the filing deadline for a bare trust in the year of wind up is 90 days from the end of the calendar year in which the wind up occurs.

Part (c)

In the situation described, Nominee Corp appears to be the trustee of a bare trust with respect to the sold property. The trustee of a trust is responsible for filing a T3 return required under paragraph 150(1)(c), including Schedule 15 (where required by section 204.2 of the Income Tax Regulations), for the taxation year of the trust.

Katie Robinson & Julia Clarkson
2024-100585
May 7, 2024

ENDNOTES

1 Unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.

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