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: 1. Can the CRA provide guidance on how to report income attributed to the settlor, who is not a beneficiary, pursuant to subsection 75(2), on a T3 return? 2. How does CRA suggest that situations where Alternative Minimum Tax (AMT) arises in the trust based on income which is attributed to the settlor are dealt with?
Position: 1. Guidance provided 2. See below.
Reasons: 1. As instructed in the T3 Trust Guide and on Schedule 9. 2. As instructed in Schedule 12 of the T3 Trust return.
CTF 2010 November 28, 2010
T3 Reporting and Subsection 75(2)
The "T3 Trust Guide,"(note 1) published by the CRA, indicates that a T3 return is required to be filed even if all the income for the trust is attributed to the settlor of the trust, pursuant to subsection 75(2). However, there is no line on the T3 return form to deduct amounts attributed to the settlor (who is not a beneficiary).
1) Can the CRA provide guidance on how to report income attributed to the settlor (who is not a beneficiary) pursuant to subsection 75(2) on a T3 return?
2) How does the CRA suggest that a trust deal with the situation where alternative minimum tax (AMT) arises in the trust based on income that is attributed to the settlor?
Subsection 75(2) provides for the attribution of income from property or taxable capital gains to a person resident in Canada where that property was received by the trust from the person and can revert to the person (or pass to other persons determined by that person). In some cases, the contributor of such property, including the settlor, may not be a beneficiary of the trust.
This circumstance is contemplated under the instructions for completing schedule 9 of the T3 return on page 33 of "T3 Trust Guide" under the heading "Exceptions and Limits to Income Allocations." Where income is allocated pursuant to subsection 75(2), a T3 information slip must be prepared in respect of the income attributed and issued to the person or persons to which the income is attributed.
All T3 income amounts are entered on the appropriate rows and columns of part A of schedule 9 of the T3 return. A statement showing the amount of income attributed to the person or persons must be submitted with schedule 9. The total of all allocations and designations, including those made to beneficiaries, on line 928 is transferred to part A of line 47 of the T3 Trust Income Tax and Information Return. All allocations and designations are therefore deducted from the trust's income by way of line 47 of the return.
In respect of the AMT calculation, allocated taxable capital gains are not included in the trust's adjusted taxable income for AMT purposes. These amounts are deducted from the trust's taxable capital gains and the calculation of adjusted taxable income in part 1 of section A on schedule 12 of the T3 Trust Income Tax and Information Return.
Having said this, we acknowledge that the T3 Trust Guide is not as clear as it should be in instructing how income attributed to persons who are not beneficiaries should be deducted on the T3 return. We will recommend that this be addressed in a future version of the T3 Trust Guide and the T3 Trust Income Tax and Information Return.
(1) CRA guide T4013, "T3 Trust Guide."
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