CRA finds that trustees were liable under s. 159(3) notwithstanding having obtained a post-distribution s. 159(2) certificate

An Ontario inter vivos trust distributed all its assets to its beneficiaries in 2013, and the trustees then applied for and received a s. 159 clearance certificate well after the distribution times. However, as a result of a subsequent ARQ audit, CRA then discovered that the trust had failed to report capital gains realized in 2010 and 2011.

The Rulings Directorate emphasized that these capital gains had not been disclosed on applying for the clearance certificate, and concluded that “it is reasonable to consider that … the issuance of the clearance certificate by the CRA does not relieve the Legal Representatives of their personal liability pursuant to subsection 159(3).” In other words, the trustees were personally liable under s. 159(3) as a result of distributing before getting the certificate, and the subsequent receipt of the certificate did not amount to a waiver of CRA’s right to so assess.

Neal Armstrong. Summary of 6 November 2019 Internal T.I. 2019-0798021I7 F under s. 159(3).