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) Does paragraph 150(1.2)(e) apply to a trust which is deemed to be created pursuant to subsection 149(5)? 2) Who are the trustee, settlor and beneficiaries under a trust deemed to be created pursuant to subsection 149(5)?
Position: 1) No. 2) subsection 149(5) does not deem the trust to have a settlor or beneficiaries under the trust. Trustee(s) are deemed pursuant to paragraphs 149(5)(b) and (c).
Reasons: 1) A trust deemed to be created pursuant to subsection 149(5) is not a club, society, or association described in paragraph 149(1)(l). 2) Words of the Act.
XXXXXXXXXX 2025-105746
D. Dannehl
August 27, 2025
Dear XXXXXXXXXX,
Re: Application of Trust Reporting Rules to a Trust Deemed to be Created Pursuant to Subsection 149(5)
We are writing in response to your correspondence of March 18, 2025 wherein you asked for our comments regarding whether a trust described in paragraph 150(1.2)(e) of the Income Tax Act (the “Act”) (footnote 1) includes a trust which is deemed to be created pursuant to subsection 149(5) (a “Deemed Trust”). Accordingly, you asked whether subsection 204.2(1) of the Income Tax Regulations (the “Regulations”) applies to a Deemed Trust, such that it would be required to submit Schedule 15 with its T3RET Trust Income Tax and Information Return (“T3 Return”) for the year. In addition, if it is determined that subsection 204.2(1) of the Regulations applies to a Deemed Trust, you asked for our comments on who the beneficiaries of the trust would be for this purpose.
Our comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Application of paragraph 150(1.2)(e)
When subsection 149(5) applies in respect of a club, society or association described in paragraph 149(1)(l) (the “NPO”), a trust is deemed to be created and to exist throughout the period during which the main purpose of the NPO is to provide dining, recreational, or sporting facilities. Subsection 149(5) provides the rules that apply in respect of the Deemed Trust. In particular, among others, the property of the NPO is deemed to be the property of the Deemed Trust, and the Deemed Trust is subject to tax under Part I on its taxable income. The taxable income of the Deemed Trust is calculated on the assumption that there is no income or loss other than: (i) income and losses from property; and (ii) taxable capital gains, and taxable capital losses from the dispositions of property, other than property used exclusively for and directly in the course of providing the dining, recreational or sporting facilities provided by the NPO to its members. Additionally, where the NPO is a corporation, the corporation is deemed to be the trustee of the Deemed Trust. Where the NPO is not a corporation, the officers of the NPO are deemed to be the trustees of the Deemed Trust.
It is our view that when a trust is deemed to be created pursuant to subsection 149(5), a second taxpayer (the Deemed Trust) is created which is subject to tax pursuant to the rules in subsection 149(5). Based on the understanding that a Deemed Trust is a trust other than an express trust, subsection 150(1.2) will not operate to prevent the potential application of subsection 150(1.1). Accordingly, a Deemed Trust would be required to file a T3 Return pursuant to paragraph 150(1)(c) unless any of the exceptions in paragraph 150(1.1)(b) apply. In particular, a Deemed Trust is required to file T3 Return for a taxation year for which it has:
(i) tax payable with respect to income from property held in the trust (such as income from dividends, interest, rentals, etc.), or
(ii) realized a taxable capital gain on the disposition of any capital property that is not used directly in the course of providing dining, recreational or sporting facilities to its members.
When a Deemed Trust is required to file a T3 Return pursuant to paragraph 150(1)(c), subsection 204.2(1) of the Regulations will apply to the Deemed Trust, such that Schedule 15 will be required to be included with the T3 Return to provide beneficial ownership information, unless the Deemed Trust is a trust listed in any of paragraphs 150(1.2)(a)-(o).
Since a Deemed Trust is subject to the rules outlined in subsection 149(5), none of which deem the trust to be organized and operated exclusively for social welfare, civic improvement, pleasure or recreation, it is our view that a Deemed Trust is not a club, society or association described in paragraph 149(1)(l). Therefore, a Deemed Trust is not a trust described in paragraph 150(1.2)(e). Accordingly, where a Deemed Trust is required to file a T3 Return for a particular tax year pursuant to paragraph 150(1)(c), it will also be required to complete Schedule 15 unless it meets one of the other exceptions in paragraphs 150(1.2)(a) to (o).
Who are the trustees, beneficiaries and settlor of a Deemed Trust?
As noted above, a Deemed Trust is deemed to exist pursuant to the rules in subsection 149(5) which, among others, deem particular person(s) to be the trustee(s) of the trust having control of the trust property. However, the rules in subsection 149(5) do not deem the trust to have a settlor or beneficiaries under the trust, nor do they identify any particular persons as such. Accordingly, a Deemed Trust does not have a settlor or beneficiaries. However, where a Deemed Trust has a filing obligation under paragraph 150(1)(c), subsection 204.2(1) of the Regulations would still apply such that Schedule 15 would be required to be filed with the T3 Return for the year. In such case, Schedule 15 would include the required information in respect of each person deemed to be a trustee of the Deemed Trust pursuant to the rules in paragraphs 149(5)(b) and (c).
We trust that these comments will be of assistance.
Yours truly,
Marina Panourgias, CPA, CA, TEP
Manager
Trust Section I
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 Unless otherwise stated, every reference herein to a part, section, subsection, paragraph or a subparagraph is a reference to the Act.
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