2 June 2026 STEP Roundtable Q. 3, 2026-1091021C6 - Deemed Resident Trust and Section 150

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: Can the CRA confirm that if the only property of a trust deemed to be resident in Canada pursuant to subsection 94(3) in a particular tax year is the $20 bill initially contributed to the trust on settlement, the trust is exempt from filing a T3 Return by virtue of subsection 150(1.1) assuming it meets all the conditions of that subsection? Can the CRA also confirm that the trust is not obligated to comply with section 204.2 of the Regulations (i.e., filing a Schedule 15)?

Position: Yes, and yes.

Reasons: See below.

2026 STEP CRA Roundtable – June 2, 2024

QUESTION 3. Deemed Resident Trust and Section 150

For estate planning purposes, an individual resident in Canada establishes a U.S. resident trust that will be a beneficiary under that individual’s last will and testament. The trust is settled with a $20 bill. Such planning is typical for individuals providing a legacy for a child who is a U.S. person so that the legacy received is not part of that child’s estate for U.S. estate tax purposes. No other property will be transferred to the trust until after the individual dies. As such, until other property is transferred, the trust will have no income or gains.

Pursuant to subsection 94(3)(footnote 1), the trust will be deemed to be resident in Canada and, pursuant to subparagraph 94(3)(a)(vii) will be subject to the obligations under Division I as if a resident of Canada.

Can the CRA confirm that if the only property of the trust in a particular tax year is the $20 bill, the trust is exempt from filing a T3 Trust Income Tax and Information Return (T3 Return) by virtue of subsection 150(1.1) assuming it meets all the conditions of that subsection? Can the CRA also confirm that the trust is not obligated to comply with section 204.2 of the Income Tax Regulations (“Regulations”) (i.e., filing a Schedule 15)?

CRA Response

Where subsection 94(3) applies to a non-resident trust for a tax year, the trust is deemed to be resident in Canada throughout the year for the purposes specified in paragraph 94(3)(a), including for the purpose of determining the rights and obligations of the trust under sections 150 to 180.

In general, subsection 150(1) requires taxpayers to file a return of income for each tax year on or before a specified date or within a specified time period. Pursuant to paragraph 150(1)(c), in the case of an estate or trust, a return of income shall be filed within 90 days from the end of the year. Subsection 150(1.1) provides exceptions, subject to subsection 150(1.2), to the filing requirements in subsection 150(1).

Subsection 150(1.2) operates in a manner that limits the exceptions in subsection 150(1.1), such that the filing requirements in subsection 150(1) may continue to apply if the trust is resident in Canada and is an express trust, or for civil law purposes a trust other than a trust that is established by law or by judgement, unless the trust is a trust described in any of paragraphs 150(1.2)(a) to (r).

The exception in paragraph 150(1.2)(b) applies where a trust holds assets with a total fair market value that does not exceed $50,000 throughout the year. If a particular trust meets this exception, or one of the other exceptions listed in subsection 150(1.2), subsection 150(1) will not apply where the trust also meets one of the exceptions in subsection 150(1.1).

Since the trust is deemed to be resident in Canada pursuant to subsection 94(3), it would be required to file a T3 Return pursuant to paragraph 150(1)(c) unless the exception in paragraph 150(1.1)(b) also applies. In particular, a trust is required to file a T3 Return for a tax year where:

• tax is payable under Part I by the trust for the year, or
• the trust has a taxable capital gain or disposes of capital property in the year.

Since the only property of the trust in the tax year is the $20 bill, the trust is a trust described in paragraph 150(1.2)(b) for the particular tax year. Further, since the trust has not realized any income or gains and has not disposed of any capital property in the tax year, the exception in paragraph 150(1.1)(b) applies. As such, the trust will not be required to file a T3 Return pursuant to subsection 150(1) for the particular tax year.

Subsection 204.2(1) of the Regulations applies in respect of a trust, other than a trust described in any of paragraphs 150(1.2)(a) to (r), that is required to file a T3 Return pursuant to subsection 150(1). Since the trust is described in paragraph 150(1.2)(b), and is not required to file a T3 Return pursuant to subsection 150(1), it is also not required to file Schedule 15 for the particular tax year.

Additionally, since the T3 Return is both a return of income and an information return, the statutory requirement to file a T3 Return exists, pursuant to section 204 of the Regulations, where the trustee has control of, or receives income, gains or profits in the trustee’s fiduciary capacity, or in a capacity analogous to a fiduciary capacity. However, in this particular case, provided that the trustee does not have the control of, or receive income, gains or profits in the trustee’s fiduciary capacity, the trust will also not be required to file a T3 Return pursuant to section 204 of the Regulations for the particular tax year.

Finally, a trust deemed to be resident in Canada pursuant to subsection 94(3) is not considered to be resident in Canada for the purposes of section 233.2. Accordingly, the $20 settlement constitutes a contribution to a non-resident trust under subsection 94(1), such that subsection 233.2(4) would require the settlor to file Form T1141 for the year of contribution and subsequent years provided the filing conditions continue to be met and no exclusion applies.

Katie Robinson
2026-109102

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 Income Tax Act (the “Act”).