CRA confirms that a s. 94(3)(a) trust had a non-resident portion arise on the death of a resident contributor so that it could elect under s. 94(3)(f)

A non-resident trust with only non-resident beneficiaries was a deemed resident trust under s. 94(3)(a) because three resident individuals had previously made direct contributions to the trust, and those contributions continue to be held by it. However, one of the contributors (A) died on September 1, 2025.

CRA indicated that, upon such death, the contribution of A ceased to form part of the deemed resident trust's resident portion, and became a non-resident portion, since A had ceased to be a resident contributor on death. Accordingly, the deemed resident trust could elect under s. 94(3)(f), with a resulting deemed disposition under s. 69(1) of the property in the non-resident portion to a non-resident portion trust.

If the property forming the non-resident portion earned dividend income of $5,000 from January 1 to August 31, 2025, and $10,000 from August 1, 2025 to December 31, 2025, the $5,000 would be included in the deemed resident trust's T3 return for 2025; and the $10,000 would be considered to belong to the non-resident portion of the trust and would be subject to Part I tax only to the extent of the application of s. 104(13) (i.e., not at all with only non-resident beneficiaries).

Regarding the allocation of expenses between the deemed resident trust and the non-resident portion trust, CRA stated that, based on the Canderel findings, a taxpayer can choose any method of determining profit that provides an accurate picture of the taxpayer's profit for the year, provided that it is not inconsistent with the provisions of the Act, rules of law, and well-accepted business principles.

Neal Armstrong. Summary of 2 June 2026 STEP Roundtable, Q.13 under s. 94(3)(f).