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.
Strategy Institute - 1998 Round Table
Trust Returns
Why is it that a Trust Return having a December 31 year-end has to be filed within 90 days from the end of the year, whereas a T5 Return of Investment Income and a T1 Income Tax Return must be filed by February 28 and April 30, respectively?
Answer
A T1 Income Tax Return is a return prescribed within section 150 of the Income Tax Act and a T5 Return of Investment Income is an information return prescribed within Part II of the Income Tax Regulations. Paragraph 150(1)(d) requires a T1 return for a taxation year to be filed by April 30 of the following year and subsection 205(1) of the Regulations requires a T5 Return to be filed by the last day of February each year in respect of the preceding calendar year. The Trust Income Tax and Information Return ("T3 Return") is, uniquely, both an income tax return and an information return that is required by paragraph 150(1)(c) of the Act and subsection 204(2) of the Regulations to be filed within 90 days from the end of the trust's taxation year. An example best explains why the filing dates for a T3 Return and a T5 Information Return differ. Consider a trust with a December 31 year-end which holds a substantial investment portfolio and has beneficiaries who are individuals. Before the trust's T3 Return can be prepared, the trustee must first determine the income of the trust. Since the trust itself will be the recipient of information slips (e.g., T5 slips for interest or dividends), the trustee may not be in a position to determine the income of the trust before the end of February. As a result, the trustee has only 30 days in which to complete the calculation of the income of the trust, determine the amount of income to allocate or flow through to the beneficiaries and file the T3 Return. On the other hand, the filing date for a T3 Return cannot be the same as that for a T1 Return because the individual beneficiaries of the trust need to receive their T3 slips from the trust in time for them to complete and file their T1 Returns.
References: Doc 9733818 940262A
Instalment Payments
In certain circumstances an individual may be required to pay his or her taxes by instalments. Why is it that trusts are not required to make instalment payments?
Answer
Subsection 156 of the Act requires an individual to make instalment payments if certain conditions are met. Since trusts are taxed as individuals, generally, they are subject to these instalment payment provisions. For example, an inter vivos trust, including a mutual fund trust, may be required to make quarterly instalments during the year on account of its Part I tax payable for the year. However, a testamentary trust, instead of making instalment payments, is allowed to pay its tax payable for the year within 90 days from the end of the taxation year by virtue of paragraph 104(23)(e).
References: ss 104(23) and 156(1) & (2)
Canadian Income Taxation of Trusts - page 590.
G. Keable
June 1998
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