90 C.R. - Q23

Where a law firm receives funds from its clients to be held in trust pending the application of the funds for disbursements or against fees for services, the investment income if the relationship is one of trust/beneficiary will normally be included in the income of the client by virtue of s. 75(2) and no trust return will be required.

Regulation 201(2) is considered to apply in the situation where a law firm holds funds received from its client in trust pending application of those funds for disbursements or against fees for services rendered, on the basis that s. 75(2) of the Act deems the investment income to be income of the client rather than of the trust. Where the client is a non-resident (so that s. 75(2) does not apply) RC is prepared to waive the requirement under s. 204(1) of the Regulations to file a T3 return where the appropriate Part XIII tax is remitted to RC.