Principal Issues: A mutual fund trust elects under subsection 132.11(1) to use a December 15 taxation year (electing MFT). Electing MFT acquires a beneficial interest in another trust (underlying trust) after the electing MFT's December 15, 201x taxation year, but before the end of the calendar year: 1. If the underlying trust makes an income distribution after December 15, but before the end of its December 31, 201x taxation year, will the income be included in the electing MFT's December 15, 201x taxation year, or will it be included in the electing MFT’s subsequent December 15 taxation year? 2. Would the response in (1) differ, if the underlying trust had also elected under subsection 132.11(1) to have a December 15 taxation year?
Position: 1. The electing MFT must include the income paid or payable by the underlying trust in its December 15, 201x taxation year. 2. The result is the same.
Reasons: 1. Electing MFT is a beneficiary of the underlying trust and the underlying trust's December 31 taxation year ends in the calendar year after the electing MFT's December 15 taxation year; therefore, subsection 132.11(3) applies. 2. Subsection 132.11(4) and paragraph 132.11(5)(c) will apply such that the top electing MFT will be deemed to be a beneficiary of the underlying trust on December 15, and each amount that is paid or becomes payable by a the underlying trust in the last 16 days of the calendar year will be deemed to be paid or to have become payable on December 15.
