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 reversionary trust that holds non-income producing property required to file a T3 Return?
Reasons: See below.
STEP CRA Roundtable – June 10 2016
Question 13. Filing obligation for 75(2) trust holding non-income producing property
The “Who Should File” section of the T3 Guide states:
“A T3 return must be filed if the trust is subject to tax, and any one of the following conditions applies. The trust: … holds property that is subject to subsection 75(2) of the Act”
This seems to suggest that a reversionary trust is required to file a T3 Trust Income Tax and Information Return for a year regardless of whether the trust has tax payable, or whether property subject to subsection 75(2) earns any income or profits, or generates a capital gain.
Can the CRA comment?
At the 2006 STEP National Conference, we noted that the T3 Trust Income Tax and Information Return is both a return of income and a general information return. A T3 return serves to report not only information about the reporting trust, but also additional information, such as that affecting the taxation of persons (for example, beneficiaries or settlors) having some connection to the trust.
The requirement for a trust to file a return is provided in paragraph 150(1)(c) of the Act and section 204 of the Regulations. Subsection 150(1.1), as it applies to a Canadian resident trust, provides that the trust is required to file an income tax return if tax is payable by the trust or the trust disposes of capital property or realizes a capital gain. Subsection 204(1) of the Regulations provides that every person having control of or receiving income, gains or profits in a fiduciary capacity must file a return. Therefore, a T3 return is required for a reversionary trust where the trustee computes nil income for the trust for tax purposes because subsection 75(2) applies to attribute income to the person from whom the trust directly or indirectly received the property (or property for which it was substituted).
Conversely, where a person in a fiduciary capacity does not control or receive income, gains or profits during the tax year, they are not required to file a T3 return for that year.
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