CRA indicates that information missing from a T3 return which is substantive to the return would cause a s. 94(3)(f) made with that return to be invalid

S. 94(3)(f) and the s. 94(1) definition of “electing trust” contemplate that a trust which is deemed under s. 94(3)(a) to be resident may elect, with its return for its first taxation year in which it is subject to the s. 94 rules, to exclude its “non-resident portion” from taxation under those rules. If a trust did not file a schedule of assets as requested in Question 1 of the T3 income tax return for that year, would an election made by it under s. 94(3)(f) be invalid?

CRA noted that, having regard to s. 32 of the Interpretation Act, the question was whether the missing information could be referred to as being substantial to the T3 return, i.e., impacting the substance of that prescribed form. Although this was a question of fact, CRA indicated that it was reasonable to conclude that a schedule of assets supporting the amount of income subject to Canadian tax (or the non-resident portion that was not subject to Canadian tax) may be viewed as substantive to the T3 return, so that failure to provide the Schedule would cause the T3 return to be considered to be invalidly filed.

Accordingly, where an s. 94(3)(f) election was filed with a T3 return for that first taxation year which was invalid because of the missing schedule, that election also would be invalid.

If the taxpayer then made a second attempt at filing a T3 return that was not missing substantive information and therefore could be considered validly filed, it would represent a return of income for the first taxation year in which the election could be made, so that the s. 94(3)(f) election filed with that return would be validly filed, even though the return was filed late.

Neal Armstrong. Summary of 4 October 2024 Internal T.I. 2024-1013191I7 under s. 94(3)(f).