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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Can a trust elect to be a master trust after its first year of existence?
Position: Yes
Reasons: Even though Guide says no, the Act clearly provides for it.
XXXXXXXXXX 980152
M. P. Sarazin
Attention: XXXXXXXXXX
April 20, 1998
Dear Sirs:
Re: Master Trusts
This is in reply to your facsimile dated January 20, 1998, wherein you requested confirmation of your understanding of certain Departmental positions in respect of master trusts. The expression "master trust" has the meaning assigned by paragraph 149(1)(o.4) of the Income Tax Act (the "Act").
(a) The election referred to in paragraph 149(1)(o.4) is made when the trust encloses a letter (indicating that the trust is electing to be a master trust) with the trust’s T3 Trust and Information Tax Return for the first taxation year in which it elects to be a master trust.
Department’s Position
Your understanding is correct. However, the trust need not make an election in its first year of existence and the election can only be made if the trust has met all of the conditions set out in section 5001 of the Income Tax Regulations (the "Regulations") at all times after it was created and before the time the election is made. In addition, the election cannot be made retroactively to cover a preceding year. The information provided on page 11 of the 1997 T3 Guide and Trust Return (the “Guide”), which confirms that the election is made by enclosing a letter with the T3 return, appears to be misleading in that it states that the trust must elect to be a master trust in its income tax return for its first taxation year. We have asked the authors of that publication to correct this statement.
(b) Once made, an election may not be revoked.
Department’s Position
There is no provision in the Act that provides for the revocation of an election to be a master trust. A master trust could cease to qualify as a master trust by not satisfying one of the conditions in section 5001 of the Regulations or by voluntarily ceasing to operate as a master trust and beginning to operate as an ordinary taxable trust.
(c) For taxation years subsequent to the year in which an election under paragraph 149(1)(o.4) is made, the trust does not have to file a T3 return.
Department’s Position
This position is correct, subject to (d) below, and it is also confirmed on page 11 of the Guide.
(d) Where a master trust is liable for tax under Part XI of the Act, a return is required to be filed under subsection 207(1) of the Act.
Department’s Position
We confirm that, where a master trust is liable for Part XI taxes, a return has to be filed for the year. The Department will accept a T3D or a T3P that is filed by the master trust as meeting the requirement under subsection 207(1) of the Act.
We trust that the above comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1998
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1998