Chobham Corp. – Tax Court of Canada finds that a s. 94(3) trust with a Quebec resident contributor was subject to double tax

The taxpayer, which was a trust that was factually resident in Panama but was deemed under ITA s. 94(3) to be resident in Canada because it had a resident contributor who resided in Quebec, was assessed for federal surtax under s. 120(1) and was denied the Quebec abatement under s. 120(2), on the basis that, as per Reg. 2601(1), it was not resident in Quebec (or any other particular province) on December 31 of the particular taxation years and thus did not have any "income earned in the year in a province" as defined in s. 120(4). However, because the resident contributor was a resident of Quebec, the trust was also subject to taxation on its income under the Taxation Act (Quebec), notwithstanding the absence of relief from the federal surtax or through the Quebec abatement.

In confirming the federal reassessments and in rejecting the trust’s submission that it was resident in a province (Quebec) for purposes of Reg. 2601(1) because it was deemed to be resident in Quebec for TA purposes, Clark J stated:

The use [in Reg. 2601(1)] of the word “resides” refers to established principles of residency under the Income Tax Act. While taxpayers may be deemed resident in Canada under various provisions such as paragraph 94(3)(a), those provisions do not apply for the purpose of Regulation 2601(1) because they do not refer to any particular province.

Regulation 2601(1) [only] applies if the individual is factually resident in a province on December 31 of a particular taxation year. …

Federal and provincial tax liabilities remain separate jurisdictional issues.

Neal Armstrong. Summary of Chobham Corporation Ltd. v. The King, 2026 TCC 127 under Regulation 2601(1).