News of Note
CRA describes how a bare trust that was not required to file in its terminal year can communicate its “closed” status
Email this ContentA bare trust filed a T3 return (including Sched. 15) for its 2023 tax year prior to the CRA announcements that bare trust returns were not required for the 2023 – then the 2024 - tax year. The bare trust ceased to exist in 2024 so that it will never file a final T3 return. How can it communicate so that it is no longer considered a required filer?
CRA indicated that the trustee may:
(i) send a letter to the trust tax centre indicating that the bare trust has ceased to exist, and providing the account name and number, and the date of trust termination; or
(ii) file a final T3 return for the 2024 tax year with the date on which the bare trust ceased to exist.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.3 under s. 150(1.2).
CRA indicates that the parents referred to in the ss. 84.1(2.31)/(2.32) rules can be trustees of a trust holding the purchaser corporation or contingent residuary beneficiaries of such trust
Can shares (which do not amount to control) of the purchaser corporation referred to in s. 84.1(2.31) or (2.32) be held by a trust where:
- the parent is a contingent beneficiary in the event of death of a child or all members of the child group, or
- the parent and the parent’s spouse or common-law partner are sole trustees or a majority of the trustees.
CRA noted that the context of this question was the rules in ss. 84.1(2.31)/(2.32)(d) and (e) which provide that the parents, from the time of the disposition of the subject shares, cannot own, directly or indirectly, 50% or more of the shares of any class of the purchaser corporation or the subject corporation other than certain non-voting preferred shares and that, within 36 months of the disposition, must have ceased owning, directly or indirectly, any shares of the purchaser corporation or the subject corporation other than those certain non-voting preferred shares.[
Turning then to the look-through rule in s. 84.1(2.3)(c)(ii) as to the meaning of “own, directly or indirectly,” CRA indicated that it would not consider a person to have an interest in a trust if that person's interest depended solely on the occurrence of an uncertain event, such as a child predeceasing a parent so that, during the lifetime of such child or relevant members of the child group, the parent with such contingent interest would not be considered to own any shares of the purchaser corporation held by the trust.
Regarding the parents as trustees, CRA indicated that it would not consider them in such capacity to own shares of the purchaser corporation for purposes of the share ownership limitations in s. 84.1(2.31)(d) and (e), and in ss. 84.1(2.32)(d) to (f). It would apply the look-through rule in s. 84.1(2.3)(c)(ii) and, if applicable, the deeming rule in respect of discretionary interests in s. 84.1(2.3)(d), to determine who owned directly or indirectly any property held by the trust.
Neal Armstrong. Summaries of 17 June 2025 STEP Roundtable, Q.2 under s. 84.1(2.3)(c)(ii) and s. 84.1(2.31)(d).
CRA indicates that the children receiving an intergenerational transfer may control the purchaser corporation indirectly or as trustees of a trust
Our 2025 STEP Roundtable page - which provides the questions posed, and summaries of the preliminary oral responses given, at the 2025 STEP CRA Roundtable held on Tuesday – is now available.
Q.1 concerned the requirement in the intergenerational transfer rules in ss. 84.1(2.31) and (2.32) regarding continued control by the child group of the purchaser corporation. CRA indicated that the child group may own the purchaser corporation through one or more holding companies owned by them, noting that it was not required that they own shares directly in the purchaser corporation and that the concept of control included indirect control.
Regarding whether shares of the purchaser corporation could be held in a trust under which the only beneficiaries were members of the child group, CRA noted that the focus should instead be on who the trustees of the trust were, as it was the trustees who would control the purchaser corporation. In this regard, CRA noted its position that, in the absence of evidence to the contrary, it considered there to be a presumption that all the trustees would constitute a group, so that generally all such trustees would need to be members of the child group.
Neal Armstrong. Summary of 17 June 2025 STEP Roundtable, Q.1 under s. 84.1(2.31)(b)(ii).
Income Tax Severed Letters 18 June 2025
This morning's release of three severed letters from the Income Tax Rulings Directorate is now available for your viewing.
Fournier-Giguère – Federal Court of Appeal confirms that individuals deriving a sustained and significant income from full-time poker gambling were engaged in a business
The three taxpayers, who were friends, were reassessed to include income from their poker gambling (of the type Texas Hold’em without limit) for three to five taxation years (depending on the taxpayer, with none of the years a loss year), falling in the period 2008 to 2012, of $5,241,025 for Mr. D’Auteuil, $3,219,074 for Mr. Bérubé, and $1,450,000 for Mr. Fournier-Giguère.
LeBlanc JA summarized the findings of the Tax Court as follows:
a) The appellants' poker activities were, for them, much more than mere entertainment or a recreational activity;
b) The appellants played poker to earn a living, making them professional poker players;
c) Their poker activities represented their sole source of income (or the main source of income, in the case of Mr. D’Auteuil);
d) The appellants devoted almost all of their time to it, apart from sleeping, eating, and partying;
e) Based on the earnings generated from poker, they had the ability to achieve profits on a consistent and regular annual basis, even though the outcomes of the games could not be predictably controlled;
f) At this level of earnings over such a long period, they could reasonably expect to make a living by playing poker;
g) Despite their unconventional lifestyle, they exhibited the behavior of "serious businessmen": they played to win; they had strategies that they adapted according to table levels and the strength of their opponents; they used software that allowed them to gather information on their opponents' playing trends, track their earnings on gaming sites, and analyze their personal statistics;
h) They adopted objective standards for risk management, risk minimization, and income maximization; and
i) They used their expertise and skills to make a living from poker, a game of chance in which skill plays a significant role.
LeBlanc JA did not find any reversible error in these findings or the Tax Court’s conclusion that their earnings were income from a business.
Neal Armstrong. Summaries of Fournier-Giguère v. Canada, 2025 CAF 112 under s. 40(2)(f) and s. 3(a) – business.
CRA indicates that a municipal bylaw requiring division of an apartment building into condo rental units could preclude access to the purpose-built rental housing (PBRH) rebate
The company acquired an existing single-family house in order to demolish it and construct two identical buildings, each containing four residential units for long-term rental use. It was unclear whether the municipal authority's bylaws required each unit to be strata-titled or whether it was only each of the two buildings that was required to be strata-titled.
Regarding the first alternative, CRA noted that a "multiple unit residential complex" (MURC) did not include a condominium complex, whose definition relevantly referred to a residential complex that contained more than one residential condominium unit. Accordingly, there would be no eligibility for the PBRH rebate.
Under the second alternative, each building could qualify as a MURC, so that the PBRH rebate would be available if the other requirements were satisfied.
Neal Armstrong. Summary of 13 August 2024 GST/HST Interpretation 247663 under Real Property (GST/HST) Regulations, s. 4(2).
CRA indicates that "actual eligible use percentage" of a carbon capture project should be based on the end “use” (i.e., capture) of the carbon
Aco owned and operated a facility to capture carbon dioxide emissions from its industrial facilities. The captured carbon was then transported through the pipeline of Bco, for delivery to the carbon sequestration hub of Cco. However, significant unanticipated fugitive emissions of the captured carbon occurred on the pipeline, which constituted an “ineligible use” of the captured carbon as defined in s. 127.44(1).
In this context, how was the "actual eligible use percentage" computed under s. 211.92(1) in respect of Aco’s CCUS project? CRA indicated that in its view it was “the end use of captured carbon that should be used in quantifying the amount of captured carbon in both eligible and ineligible use” for purposes of such definition.
As a result, “Aco would be required to use measurements of the end use of its captured carbon” (presumably in the hands of Cco). However, as the unanticipated fugitive emissions occurred within Bco’s pipeline transportation network, “Aco may be able to avail itself of the relief provided in subsections 211.92(6) and (7) … because such emissions would likely be due to extraordinary circumstances outside of the control of Aco.”
Neal Armstrong. Summary of 25 March 2025 External T.I. 2024-1039131E5 under s. 211.92(1) - "actual eligible use percentage".
We have translated 6 more CRA interpretations
We have translated a further 6 CRA interpretations released in July of 2000. Their descriptors and links appear below.
These are additions to our set of 3,227 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 24 ½ years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
CRA rules that the back-to-back loan rule in s. 90(7) precluded the application of s. 90(6) to “upstream” loans made by a CFA to specified debtors
A non-resident subsidiary of Canco (“CFA”) had used the proceeds of loans received from third-party banks and through bonds issued in its country of residence to make loans under the same terms and conditions (i.e., tenor, interest rate, and currency) as the 3rd-party bank or bond borrowings, plus cross-charged guarantee fees, directly to Finco 1 and Finco 2, which were non-resident “sisters” of Canco and CFA, i.e., Finco 1 and Finco 2 were “grandchild” or “greatgrandchild” subsidiaries of the non-resident parent of Canco. Thus (before considering s. 90(7)), Finco 1 and Finco 2 were “specified debtors” in respect of Canco. In most cases, each such 3rd-party was opened on the same day as the subsequent on-loans to the Fincos, although in a few cases, there was a gap of up to 13 days.
Canco will sell all of its shares of CFA to Canco’s foreign parent for cash consideration equal to their fair market value and elect under s. 93(1) to the extent of any capital gain.
CRA effectively ruled that the back-to-back rule in s. 90(7) deemed the actual loans from the third-party lenders to CFA, and by CFA to the Fincos not to exist and deemed those third party lenders to have made their loans directly to the Fincos on the same terms as the (actual) loans to the Fincos by CFA. Accordingly, s. 90(6) would not apply to require any inclusion in Canco’s incomes in respect of CFA’s loans to the Fincos.
Neal Armstrong. Summaries of 2024 Ruling 2024-1027391R3 under s. 90(7) and s. 90(8)(a).
Kane – Quebec Superior Court states it was bound by horizonal stare decisis to follow a declaration of unconstitutionality in another Superior Court decision under appeal
The applicants in this case were Mohawks who were charged under s. 42 of the Excise Act for failure to pay duty on tobacco products. In Montour, Bourque, J. had found that s. 42 was constitutionally inapplicable to the Mohawks in that case, who had also failed to pay duty on tobacco products:
- by reason of the circumstances of the case before her warranting a departure from the framework developed in Van der Peet ([1996] 2 S.C.R. 507) in respect of Aboriginal rights - so that the applicants' participation in the tobacco trade should be considered protected by an Aboriginal right to freely trade; and
- by reason of an inferred meta-treaty (the Covenant Chain) having been unjustifiably breached by s. 42 because the Crown had not discussed tobacco-related issues with the Mohawks prior to the passage of the Excise Act.
Here, Royer, JSC, found that no circumstances had been established before him justifying a departure from the Van der Peet framework, so that he continued to be bound by vertical stare decisis, i.e., the Montour decision respecting Aboriginal rights could not be followed. However, the finding in Montour respecting treaty rights was subject to the doctrine of horizontal stare decisis (i.e., the requirement to follow prior decisions of the same court in the province) given inter alia that no court had made a finding one way or the other, prior to Montour, as to the effect, if any, of the Covenant Chain.
Accordingly, he was bound to follow Montour and declare that s. 42 was constitutionally inoperative in respect of the applicants before him. Before rejecting the submission of the Attorneys General that the Montour decision was not binding because it was under appeal, he stated that it was not for him to determine that Montour was “plainly wrong” as alleged and that “the effect of a declaration of unconstitutionality has always been immediate unless the effect is suspended by the court.”
Neal Armstrong. Summary of R. v. Kane, 2024 QCCS 5012 under General Concepts – Stare decisis.