Principal Issues: (1) Are the fees earned by the estate trustee, for the administration of the estate, treated as income from an office or income from a business? (2) What are the estate's and estate trustee's obligations under the Income Tax Act (the Act)? (3) Is the estate trustee liable if the estate has insufficient resources to cover its liability under the Act?
Position: (1) Depends on the facts. (2) If the fees are treated as income from the office, the estate must withhold income tax and Canada Pension Plan contributions and prepare a T4 to report the amount as income from an office or employment. Fees earned in the course of a business form part of the business income of the taxpayer under subsection 9(1) of the Act and the estate should issue a T4A. (3) Yes, to the extent of the value of the distributed property.
Reasons: (1) The correct treatment of the estate trustee fees is to be determined by the taxpayer. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office; (2) See details in the reply. (3) Subsection 159(1) provides that the legal representative of a taxpayer is jointly liable with the taxpayer to pay any amount payable and to perform any duty or obligation under the Act.
