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: Is a T5 information slip required to be prepared when a trustee of a trust makes, to a resident of Canada, a payment of interest in respect of money on loan to the trustee.
Position: Yes, if the trustee is a corporation, association, organization or institution.
Reasons: Regulation 201(1)(b)(ii)(A)
XXXXXXXXXX
2012-043609
L.M. Carruthers, CA
August 13, 2012
Dear XXXXXXXXXX,
Re: T5 Filing requirement
This is in reply to your email of February 8, 2012, in which you asked our assistance in clarifying whether a T5 information slip was required to be prepared in a hypothetical scenario which you described in your email as follows:
1. An individual who is a resident of Canada (the “Individual”) loaned money to an inter vivos trust which deals with the Individual on a non-arm’s length basis (the “Trust”).
2. The loan is interest bearing.
3. The Trust pays interest on the loan to the Individual on an annual basis.
4. The Individual reports the interest income earned from the loan on his/her personal tax return annually.
5. The Trust deducts the interest payment as an interest expense on its trust return.
You indicated that it was your view that there is no requirement in clause 201(1)(b)(ii)(A) of the Income Tax Regulations (the “Regulations”) for the Trust to report on a form T5 information slip the interest paid or accrued on the loan because the Trust is not a corporation, association, organization nor institution.
Our comments
The particular situation outlined in your email appears to relate to a factual one, involving one or more specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. An Advance Income Tax Ruling is not issued where a transaction has been completed or is significantly advanced. In those instances you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. We are, however, prepared to offer the following general comments which may be of assistance.
Clause 201(1)(b)(ii)(A) of the Regulations provides that, every person who makes a payment to a resident of Canada as or on account of interest in respect of money on loan to a corporation, association, organization or institution shall make an information return in prescribed form (i.e, a T5 slip).
It is our understanding that in the hypothetical scenario described above, the Individual would have actually loaned money to the trustee of the Trust and that it is the trustee of the Trust which would be making payments of interest to the Individual in respect of money on loan to the trustee. Therefore, pursuant to clause 201(1)(b)(ii)(A) of the Regulations, the trustee would be required to file a T5 slip to report the interest payment if the trustee were a corporation, association, organization or institution. If on the other hand, the trustee of the Trust were an individual, a T5 slip would not be required.
We trust our comments will be of assistance to you.
Yours truly,
Doug Watson
For Director
Financial Industries Division
Income Tax Rulings Directorate
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