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: Taxpayer submitted four questions to XXXXXXXXXX TSO in respect of a trust to hold mineral rights on behalf of her and XXXXXXXXXX for which she is the trustee.
Position: Guidance as to relevant information available on the CRA website provided along with suggestion that professional guidance may be appropriate.
Reasons: The enquiry raised no interpretive issues and asked questions that are not the mandate of the CRA; however, we have provided as much guidance as possible.
XXXXXXXXXX
2013-047732
Phillip Kohnen, CMA
(613) 946-4189
February 11, 2013
Dear XXXXXXXXXX:
Re: Mineral Rights Trust Account
This is in reply to your letter of October 10, 2012 addressed to the Director of Audit in the XXXXXXXXXX Tax Services Office. Your correspondence, which was forwarded to our Directorate and received on February 5, 2013, posed the following four questions in respect of your role as trustee in regard to certain mineral rights which your mother has transferred to you and XXXXXXXXXX:
1) What Income Tax Return will I need to complete by December 31st, 2012, 2013, 2014 etcetera if any income is received?
2) What type of trust account should I open with the bank:
- in order to have the funds divided equally amongst all XXXXXXXXXX of us, and
- to ensure that everyone would be responsible for the income tax on their portion of the funds received from the leases/royalties, etc.?
3) What type of documentation/paper trail do I need to maintain to satisfy the Canada Revenue Agency?
4) If there are no funds or activities on the mineral rights, how would you go about closing the account and what documentation/return will be required?
Our comments
As is noted on page 12 of the 2012 T3 Trust Guide (T4013), in the section entitled "Who should file", a T3 return must be filed if a trust is subject to tax, and any one of the listed conditions is applicable. Please note that this guide is available on the Canada Revenue ("CRA") website at:
http://www.cra-arc.gc.ca/E/pub/tg/t4013/t4013-12e.pdf
In regard to your second question as to what sort of trust account should be opened with a financial institution, please note that the CRA cannot offer neither tax planning nor financial planning advice. Accordingly, we are unable to provide you with a definitive response to your questions or how to manage your tax affairs. You may wish to seek professional tax advice in this regard.
Page 17 of the T3 Guide discusses the requirement to keep books, records and supporting documentation. As is noted in the Guide, further information can be found in Information Circular IC78-10R5, Books and Records Retention/Destruction as well as in Guide RC4409, Keeping Records, available on the CRA website. You may also wish to review the information available at the following link on our website:
http://www.cra-arc.gc.ca/records/
Should you later choose to close a trust account that you may open at a financial institution, please be aware that the terms of such arrangement between the institution and yourself, as trustee, may dictate how this must be done. Furthermore, provincial trusts laws in certain jurisdictions could also dictate how this must be undertaken. Please note that CRA does not have the mandate to advise taxpayers on such matters; here again, you may wish to seek professional advice in this regard.
Yours truly,
Phillip Kohnen
For Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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