21 July 2008 External T.I. 2007-0251601E5 - filing requirements of a corporate (bare) trustee

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Where a corporation holds real property as bare trustee, what are the corporation's filing requirements in respect of that property?

Position: Income from property held in trust is reported on a T3 return unless the trust meets the exceptions in subsection 104(1). If the trust is deemed not to be a trust for tax purposes, the beneficiary reports the income from that property as it is earned by the bare trust. However, the corporation is still required to file a T2 corporate return.

XXXXXXXXXX 	2007-025160
		Annemarie Humenuk

Attention: XXXXXXXXXX

July 21, 2008

Dear XXXXXXXXXX :

Re: Bare Trusts

This is in reply to your letter of July 11, 2007 in which you ask for clarification of the proper reporting of income from property held in a bare trust as described in GST/HST Technical Information Bulletin B-068, Bare Trusts.

As noted in the GST/HST bulletin, the comments contained therein are specific to the administration of the GST/HST under the Excise Tax Act and related provincial legislation. Under the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act"), property held in a trust is reported on a T3 Income Tax and Information Return and the income from such property does not form part of the trustee's personal income.

A trust for the purposes of the Act is defined in subsection 104(1) of the Act. That subsection provides that, if the arrangement is one in which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property and the trust is not a trust described in paragraphs (a) to (e.1) of the definition of trust in subsection 108(1) of the Act, the arrangement is deemed not to be a trust for the purposes of the Act. Thus, the income from the property is included in the income of the beneficial owner of the property and a T3 Income Tax and Information Return is not required.

In our conversation of March 3, 2008 (Humenuk\XXXXXXXXXX ), you asked if this means that a corporation created for the sole purpose of acting as a trustee in respect of a bare trust would be exempt from filing T2 Corporate Income Tax Returns. A T2 Corporate Income Tax Return is required for each year in which the corporation meets any of the criteria listed in paragraph 150(1)(a) of the Act. Thus, a T2 Corporate Income Tax Return would be required for each year in which the corporation was resident in Canada regardless of whether the corporation had any income for that year.

This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.

We trust our comments will be of assistance.

T. Murphy
Section Manager
for Division Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch