f

T3 Trust Guide 2018

L / T4013 (E) Rev. 18 canada.ca/taxes

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NOTE: In this publ icat ion, the text inser ted between square brackets represents the regular pr int in format ion.

Is this guide for you? In th is guide, you wi l l f ind in format ion on how to complete the T3 Trust Income Tax and Informat ion Return, the T3 s l ip , Statement of Trust Income Al locat ions and Designat ions, and the T3 Summary, Summary of Trust Income Al locat ions and Designat ions.

Use th is guide i f you are f i l ing a return for e i ther a testamentary t rust or an in ter v ivos t rust . For more informat ion, see "Types of t rusts" on page 29 [7] .

We have used the word "you" throughout the guide to mean the trustee, executor , administ rator , l iqu idator , or anyone prepar ing the return for a t rust . For tax purposes, estates and t rusts are t reated s imi lar ly. In calculat ing the income of an estate, references in th is guide to a t rust or t rust property inc lude estate or estate property.

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We use " the Act" to refer to the Income Tax Act . Unless otherwise stated, a l l leg is lat ive references are to the Income Tax Act and the Income Tax Regulat ions.

I f you need more informat ion af ter reading th is guide, v is i t canada.ca/taxes , or ca l l 1-800-959-8281 .

Our publ icat ions and personal ized correspondence are avai lable in bra i l le , large pr int , e- text , or MP3 for those who have a v isual impairment . For more informat ion, go to canada.ca/cra-mult iple-formats or cal l 1-800-959-8281 .

I f you are outs ide Canada and the Uni ted States, cal l us at 613-940-8495 . Contact your serv ice provider or operator to in i t ia te the col lect ca l l . We accept col lect cal ls by automated response. You may hear a beep and exper ience a normal connect ion delay.

La vers ion f rançaise de ce guide est in t i tu lée T4013, T3 – Guide des f iducies.

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What's new for 2018 We l is t the serv ice enhancements and major changes below, inc luding announced income tax changes that are not yet law at the t ime th is guide was publ ished. I f they become law as proposed, they wi l l be ef fect ive for 2018 or as of the dates g iven. For more informat ion about these changes, see the areas out l ined in colour in th is guide.

Health and Welfare Trusts (HWTs) Under proposed changes, the CRA wi l l no longer apply i ts administ rat ive posi t ions wi th respect to HWTs af ter the end of 2020. Transi t ional tax ru les wi l l be int roduced to fac i l i tate the convers ion of ex ist ing HWTs to Employee Li fe and Heal th Trusts.

In addi t ion, the CRA wi l l not apply i ts admin ist rat ive posi t ions wi th respect to HWTs to t rusts establ ished af ter February 27, 2018 and wi l l announce t ransi t ional admin ist rat ive guidance re lat ing to winding up exist ing HWTs.

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New payment option Star t ing in October 2018, T3 payments can be made onl ine using CRA's My Payment serv ice. For more informat ion see "Payment opt ions" on page 99 [20] .

Dividends other than eligible dividends Effect ive January 1, 2018, the gross-up rate for dividends other than el ig ible div idends and the rate that appl ies to the taxable amount of dividends other than el igible dividends, for purposes of the div idend tax credit , have changed.

Production of trust account number For 2018 and subsequent taxat ion years, where a t rust f i les any return under the Act , i t has to prov ide the t rust account number that is assigned to i t . For more informat ion, see "Trust account number" on page 75 [16] .

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Failure to provide the trust account number For 2018 and subsequent taxat ion years, where someone makes a request for the trust account number to prepare an informat ion return under the Act , fa i lure to provide the informat ion wi l l resul t in a penalty of $100 for each such fai lure.

Tax on split income As of January 1, 2018, in addi t ion to applying to cer ta in types of income of a chi ld born in 2001 or la ter , the tax on spl i t income may now a lso apply to amounts received by adul t ind iv iduals f rom a re lated business. For more informat ion, see "Spl i t Income" on page 227 [44] .

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Table of contents Page

Before you star t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 [5 ]

Def in i t ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 [5]

Chapter 1 – General in format ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 [7]

▲ Types of t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 [7]

Code number for the type of t rust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 [15]

▲ Who should f i le . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 [15]

Trust account number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 [16]

Who can apply for a t rust account number? . . . . . . . . . . . . . . . . . . . . . . 75 [16]

How to apply for a t rust account number?. . . . . . . . . . . . . . . . . . . . . . . . . 76 [16]

What in format ion is needed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 [16]

Product ion of t rust account number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 [16]

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Page

Fai lure to provide the t rust account number . . . . . . . . . . . . . . . . . . . . . . 78 [16]

▲ What to f i le . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 [16]

Form T3-DD, Direct Deposi t Request for T3 . . . . . . . . . . . . . . . . . . . . . . . . . 81 [17]

▲ When to f i le . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 [17]

Tax year-end and f iscal per iod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 [17]

Graduated Rate Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 [17]

Al l o ther t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 [17]

Deemed year-end ru les for a l l t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 [17]

F i l ing dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 [17]

▲ How to f i le the T3 return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 [18]

Non-resident t rusts and deemed resident t rusts . . . . . . . . . . . . . . . . 93 [19]

▲ Penal t ies and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 [19]

Repeated fa i lure to repor t income penal ty . . . . . . . . . . . . . . . . . . . . . . . . 95 [19]

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Page

Payment opt ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 [20]

▲ After you f i le . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 [20]

Tax Administ rat ion Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 [21]

How to regis ter a formal d ispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 [21]

Clearance cer t i f icate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 [21]

Chapter 2 – Complet ing the return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 [21]

▲ Step 1 – Ident i f icat ion and other required in format ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 [21]

Report ing fore ign income and proper ty . . . . . . . . . . . . . . . . . . . . . . . . . . 113 [22]

Other required informat ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 [23]

Step 2 – Calculat ing tota l income: L ines 01 to 20 . . . . . . . . . . . . . . . 120 [24]

Thin capi ta l izat ion – Rules for t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 [24]

Canadian resident t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 [24]

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Page

Non-resident t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 [25]

Step 3 – Calculat ing net income: L ines 21 to 50 . . . . . . . . . . . . . . . . . 136 [26]

Step 4 – Calculat ing taxable income: L ines 51 to 56 . . . . . . . . . . . 147 [29]

Loss t rading – Rules for t rusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 [29]

Step 5 – Summary of tax and credi ts : L ines 81 to 100 . . . . . . . . . 156 [30]

Tax insta lments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 [31]

Chapter 3 – Trust schedules and forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 [32]

Schedule 1 – Disposi t ions of Capi ta l Proper ty . . . . . . . . . . . . . . . . . . . . 162 [32]

Capi ta l d isposi t ions – Rules for t rusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 [34]

Form T1055, Summary of Deemed Disposi t ions (2002 and later tax years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 [39]

Form T2223, Elect ion Under Subsect ion 159(6.1) of the Income Tax Act , by a Trust to Defer Payment of Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 [41]

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Page

▲ Schedule 8 – Investment Income, Carrying Charges, and Gross-up Amount of Div idends Retained by the Trust . . . . 215 [41]

▲ Schedule 9 – Income Al locat ions and Designat ions to Benef ic iar ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 [43]

▲ Al locat ions and designat ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 [43]

Spl i t Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 [44]

Transfers and loans of proper ty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 [44]

Except ions and l imi ts to income al locat ions . . . . . . . . . . . . . . . . . . . . 235 [45]

▲ Income to be taxed in the t rust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 [46]

▲ How to complete Schedule 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 [48]

Schedule 10 – Part XI I .2 Tax and Part XI I I Non-Resident Withhold ing Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 [51]

Complet ing the NR4 return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 [54]

Schedule 11 – Federal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 [54]

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Page

Schedule 11A – Donat ions and g i f ts tax credi t ca lculat ion . . . 300 [57]

Schedule 12 – Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 [58]

▲ Provinc ia l and terr i tor ia l income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312 [59]

Chapter 4 – T3 s l ip and summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 [60]

▲ How to f i le the T3 s l ip and summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 [60]

Electronic f i l ing methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 [60]

F i l ing by Web Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 [60]

F i l ing by Internet f i le t ransfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 [60]

Web access code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 [60]

F i l ing on paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 [60]

F i l ing using computer-pr inted (customized) forms . . . . . . . . . . . . 320 [60]

▲ Distr ibut ing the T3 s l ip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 [61]

Amending, cancel l ing, adding, or replac ing T3 sl ips . . . . . . . . 323 [61]

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Page

Amending or cancel l ing s l ips over the Internet . . . . . . . . . . . . . . . . 324 [61]

Amending or cancel l ing s l ips on paper . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 [61]

Adding s l ips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 [61]

▲ Recip ient ident i f icat ion number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 [62]

▲ How to complete the T3 s l ip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 [62]

▲ Appendix A – T3 s l ip and summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 [66]

Onl ine serv ices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 [69]

My Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 [69]

Submit t ing and f i l ing e lectronic documents to the T3 Estate and Trust Return programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 [69]

For more informat ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 [71]

Taxpayer Bi l l o f Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 [71]

What i f you need help? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 [71]

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Page

Direct deposi t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 [71]

Forms and publ icat ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369 [71]

Get t ing informat ion by te lephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 [71]

Teletypewr i ter (TTY) users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 [71]

Giv ing or cancel l ing an author izat ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371 [71]

Serv ice-re lated complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372 [71]

Formal d isputes (object ions and appeals) . . . . . . . . . . . . . . . . . . . . . . . . . . 373 [72]

Repr isa l complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 [72]

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 [73]

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Before you start

Do you need to read the whole guide? I f you are f i l ing a T3 return for an estate that has only pension income, investment income, or death benef i ts , you do not need to read the ent i re guide. We have used the ▲ symbol to lead you to the information you may need. This symbol appears in the table of contents, in the r ight margins of the guide, and in the left margins of the return beside the l ines that may relate to your s i tuat ion.

Before you star t to complete the return, be sure to read:

• "Chapter 1 – General in format ion" on page 29 [7]

• "Step 1 – Ident i f icat ion and other required informat ion" on page 108 [21]

• the int roduct ion to "Chapter 4 – T3 s l ip and summary" on page 315 [60]

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Determine the residence of the trust or estate A trust may be e i ther factual ly res ident , non-resident or deemed to be res ident in Canada. To assist in making th is determinat ion see Income Tax Fol io S6-F1-C1, Residence of a Trust or Estate.

Non-resident trusts or deemed resident trusts I f you are the t rustee for a non-resident t rust , or a deemed resident t rust (descr ibed on page 36 [9] ) , there are specia l ru les that apply in some s i tuat ions. Not a l l o f these ru les are covered in th is guide. For more informat ion, contact the numbers l is ted on page 93 [19] .

Which tax package should you use? Use the provinc ia l or terr i tor ia l forms package for the province or terr i tory where the t rust was res ident on the last day of i ts tax year.

To get any schedules and forms that you may need, go to canada.ca/ cra-forms , or cal l 1-800-959-8281 . Once you have completed the necessary schedules, forms, and statements, you wi l l be ready to complete the return. Attach al l required documents to the return.

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Note The province of Quebec col lects i ts own provinc ia l income tax. Do not ca lculate provinc ia l income tax on the t rust 's federal return i f i t was res ident in Quebec on the last day of i ts tax year . I f the t rust had income f rom a business wi th a permanent establ ishment in another province or terr i tory, you have to calculate that province's or terr i tory's income tax on the t rust 's federal tax return.

Did you know that? The Canada Revenue Agency may apply a penal ty i f an informat ion return (T3 s l ip) is miss ing the required rec ip ient ident i f icat ion number. For more informat ion, see "Recip ient ident i f icat ion number" on page 326 [62] .

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Definitions In th is sect ion, we def ine the technical terms we use in th is guide.

Administrator – a person appointed by a court to set t le the estate of a deceased person.

Allocate, al locat ion – to assign or set apart income f rom the t rust to a benef ic iary. An amount can only be a l located to a benef ic iary when one of the fo l lowing appl ies:

• the benef ic iary is ent i t led to the income in the year that i t is earned by the t rust , under the t rust document

• the t rust makes a preferred benef ic iary e lect ion to inc lude the t rust income in the benef ic iary's income

• the benef ic iary is paid income in the year that i t is earned by the t rust , at the d iscret ion of the t rustee

In most cases, the amounts you a l locate have to be inc luded in the benef ic iary's income, and they are deducted f rom the t rust 's income. For except ions to th is general ru le, see "Except ions and l imi ts to income al locat ions" on page 235 [45] .

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Arm's length – refers to a relat ionship or a transaction between persons who act in their separate interests. An arm's length transact ion is general ly a transact ion that ref lects ordinary commercial deal ings between part ies act ing in their separate interests.

A taxpayer and a personal t rust (other than a speci f ied t rust descr ibed in "Chart 1 – Types of Trusts" on page 30 [8] ) are deemed not to deal wi th each other at arm's length i f the person, or anyone not deal ing at arm's length wi th the person, is benef ic ia l ly in terested in the t rust .

"Related persons " are not considered to deal wi th each other at arm's length. Related persons inc lude ind iv iduals connected by b lood re lat ionship, marr iage, common- law partnership or adopt ion ( legal or in fact) . A corporat ion and another person or two corporat ions may also be re lated persons.

"Unrelated persons" may not be deal ing wi th each other at arm's length at a par t icu lar t ime. Each case wi l l depend upon i ts own facts. The fo l lowing cr i ter ia wi l l be considered to determine whether par t ies to a t ransact ion are not deal ing at arm's length:

• whether there is a common mind which d i rects the bargain ing for the par t ies to a t ransact ion

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• whether the par t ies to a t ransact ion act in concert wi thout separate in terests; "act ing in concert" means, for example, that par t ies act wi th considerable interdependence on a t ransact ion of common interest

• whether there is de facto contro l of one par ty by the other because of , for example, advantage, author i ty or in f luence

For more informat ion, see Income Tax Fol io S1-F5-C1, Related persons and deal ing at arm's length.

Non arm's length – general ly refers to a re lat ionship or t ransact ion between persons who are re lated to each other .

However, a non-arm's length re lat ionship might a lso exist between unrelated individuals, trusts, partnerships or corporat ions, depending on the circumstances. For more information, see the def ini t ion of "arm's length."

Beneficiary – includes the person for whose benef i t the trust is created, the person to whom the amount of an insurance pol icy or annuity is payable, or the uni t holder of a mutual fund t rust .

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Common-law partner – th is appl ies to a person who is not your spouse (see page 27 [7] ) , wi th whom you are l iv ing in a conjugal re lat ionship, and to whom at least one o f the fo l lowing s i tuat ions appl ies. He or she:

a) has been l iv ing wi th you in such a relat ionship for at least 12 cont inuous months

b) is the parent of your chi ld by b i r th or adopt ion

c) has custody and contro l of your chi ld (or had custody and contro l immediate ly before the chi ld turned 19 years of age) and your chi ld is whol ly dependent on that person for support

In addi t ion, an indiv idual immediate ly becomes your common- law partner i f you previously l ived together in a conjugal re lat ionship for at least 12 cont inuous months and you have resumed l iv ing together in such a re lat ionship.

For 2001 and later years, a person (other than a person descr ibed in b) or c) above [on th is page] ) wi l l be your common- law par tner only af ter your current re lat ionship wi th that person has lasted at least 12 cont inuous months.

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Reference to "12 cont inuous months" in th is def in i t ion inc ludes any per iod that you were separated for less than 90 days because of a breakdown in the re lat ionship.

Contribution of property – genera l ly refers to a t ransfer or loan of property, other than an "arm's length t ransfer" (as def ined in subsect ion 94(1)) to a non-resident t rust by a person or par tnership. A contr ibut ion is a lso considered to have been made by a person or par tnership where the person or par tnership makes (or becomes obl igated to make) a par t icu lar t ransfer (other than an "arm's length t ransfer") as par t of a ser ies of t ransact ions or events that inc ludes another t ransfer or loan (other than an "arm's length t ransfer") , to the t rust , by another person or par tnership.

In these c i rcumstances, the other t ransfer or loan is considered to be a contr ibut ion to the t rust by the person or par tnership only to the extent that the other t ransfer or loan can reasonably be considered to have been made in respect of the par t icu lar t ransfer or loan, or the obl igat ion to make the par t icu lar t ransfer or loan.

Deemed disposition – used when you are considered to have disposed of property, even though you did not actual ly sel l i t .

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Designate, designation – to keep the ident i ty o f cer ta in types of a l located income or credi ts . In th is way, the benef ic iar ies can take advantage of deduct ions or credi ts that re late d i rect ly to the type of income, such as a d iv idend tax cred i t or pension income amount . General ly, you report amounts designated to a benef ic iary in the appropr iate box on the T3 s l ip .

Distr ibute, distr ibution – to d iv ide the t rust property among the benef ic iar ies according to the terms of the t rust document, or according to the appl icable law.

Electing beneficiary – for a tax year of a qual i f ied disabi l i ty t rust, means an indiv idual named as a benefic iary by the part icular indiv idual ( that is the deceased indiv idual) in the instrument under which the trust was created, and who meets al l of the fol lowing condit ions:

• inc ludes in thei r return of income for the t rust year, an e lect ion made jo int ly wi th the t rust , that the t rust wi l l be a qual i f ied d isabi l i t y t rust for the t rust year

• must be e l ig ib le for the d isabi l i t y tax credi t for the benef ic iary's tax year in which the t rust 's year-ends

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• does not e lect wi th any other t rust to be a qual i f ied d isabi l i t y t rust for the other t rust 's tax year that ends in the benef ic iary's tax year

Executor – an indiv idual or t rust inst i tu t ion named in a wi l l and conf i rmed by a cour t to set t le the testator 's estate. See the def in i t ion of " testator" on page 27 [7] .

Exempt property – is t rust property that , i f d isposed of , any income or capi ta l gain resul t ing f rom the d isposi t ion is exempt f rom Canadian tax, e i ther because the t rust is not res ident in Canada, or because of a tax t reaty.

Gift – a voluntary transfer of property ( including money). For gi f ts made after December 20, 2002, this includes a gif t where the donor receives an advantage, as long as the advantage does not exceed 80% of the fair market value (FMV) of the property, or we are sat isf ied the property was transferred with the intent ion of making a gif t .

General ly, the el igible amount o f a g i f t or monetary contr ibut ion is the amount by which the FMV of the g i f ted property exceeds the amount of the advantage, i f any, received for the g i f t .

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The advantage is general ly the tota l va lue of any property, serv ice, compensat ion, use, or any other benef i t that the t rust , or a person not deal ing at arm's length wi th the t rust , is ent i t led to as par t ia l considerat ion for , or in grat i tude for , the g i f t .

Liquidator – in Quebec, the l iquidator is responsible for dist r ibut ing the assets of al l estates establ ished after December 31, 1993. For estates with a wi l l , the l iquidator 's role is s imilar to an executor 's. For estates without a wi l l , the l iquidator acts as the administrator of the estate.

Preferred beneficiary – a person resident in Canada who is a benef ic iary under the t rust at the end of the year, and who meets one of the fo l lowing condi t ions:

• he or she qual i f ies for the d isabi l i t y amount for the tax year that ends in the t rust 's tax year

• he or she:

– is 18 years of age or o lder before the end of the tax year

– is a dependant of another indiv idual for the tax year because of a mental or physical impairment

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– has income for the tax year, not inc luding income f rom a preferred benef ic iary e lect ion, which does not exceed the dependant tax credi t

In addi t ion, he or she must be one of the fo l lowing:

• the set t lor of the t rust (see the def in i t ion of "set t lor" on page 27 [ th is page] )

• the spouse or common-law partner, or former spouse or common-law partner, of the sett lor of the t rust

• a chi ld , grandchi ld, or great-grandchi ld of the set t lor of the t rust

• the spouse or common- law partner of a chi ld , grandchi ld , or great-grandchi ld of the set t lor of the t rust

Principal residence – general ly means any of the fo l lowing:

• a housing uni t

• a leasehold interest in a housing uni t

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• a share of a co-operat ive housing corporat ion, i f the share is acquired for the sole purpose of obta in ing the r ight to l ive in a housing uni t owned by that corporat ion

For more informat ion, see "Pr inc ipal res idence" on page 192 [37] .

Settlor – general ly means the person who set up a trust by contr ibut ing property to the trust. In the case of a preferred benef ic iary elect ion, a sett lor is restr icted to a person who is otherwise the sett lor of the trust and has contr ibuted the majori ty of property to the trust.

Spouse – th is appl ies only to a person to whom you are legal ly married.

Testator – the deceased person who made and lef t a val id wi l l .

Trust – a binding obl igat ion enforceable by law when undertaken. I t may be created by one of the fo l lowing:

• a person (e i ther verbal ly or in wr i t ing)

• a court order

• a s tatute

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General ly, a t rust is created when i t is proper ly establ ished and there is cer ta inty of :

• the in tent to create a t rust

• the property to be p laced in t rust

• the benef ic iar ies of the t rust

Trustee – an indiv idual or t rust inst i tu t ion that holds legal t i t le to property in t rust for the benef i t o f the t rust benef ic iar ies. The t rustee inc ludes an executor , administ rator , assignee, receiver , or l iquidator who owns or contro ls proper ty for some other person.

Vested interest – an immediate f ixed interest in property, a l though the r ight of possession and enjoyment may be postponed.

Wil l – a legal ly enforceable document that declares the intent ions about d isposal and adminis t rat ion of the testator 's estate af ter h is or her death. I t is ef fect ive only at death and can be revoked at any t ime before death.

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Chapter 1 – General information This chapter provides general in format ion on the d i f ferent types of t rusts and the f i l ing requirements for each.

▲ Types of trusts A trust is e i ther a testamentary t rust or an inter v ivos t rust . Each t rust has d i f ferent tax ru les. "Chart 1 – Types of Trusts" on page 30 [8] , descr ibes d i f ferent types of t rusts and arrangements.

Testamentary Trust

A testamentary t rust is a t rust or estate that is general ly created on and as resul t of the death of a person. The terms of the t rust are establ ished by the wi l l or by court order in re lat ion to the deceased indiv idual 's estate under provinc ia l or terr i tor ia l law.

General ly, this type of trust does not include a trust created by a person other than a deceased indiv idual, or a trust created after November 12, 1981, i f any property was contr ibuted to i t other than by a deceased indiv idual as a consequence of the indiv idual 's death. For ru les about

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testamentary trusts created before November 13, 1981, cal l 1-800-959-8281 .

I f the assets are not d is t r ibuted to the benef ic iar ies according to the terms of the wi l l , the testamentary t rust may become an inter v ivos t rust .

For tax years ending af ter December 20, 2002, a testamentary t rust may become an inter v ivos t rust i f the t rust incurs a debt or other obl igat ion to pay an amount to, or guaranteed by, a benef ic iary or any other person or par tnership (any or a l l referred to as speci f ied par ty) , wi th whom any benef ic iary of the t rust does not deal at arm's length.

This does not apply for cer ta in debts or other obl igat ions, inc luding those:

• incurred by the t rust in sat is fact ion of a benef ic iary's r ight to enforce payment of an amount payable by the t rust to the benef ic iary or to receive any par t of the t rust 's capi ta l

• owed to the benef ic iary as a resul t of serv ices provided by the benef ic iary for the t rust

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• owed to the benef ic iary as a resul t of a payment on behal f of the t rust for which property was t ransferred to the speci f ied par ty wi th in 12 months of the payment and the benef ic iary would have made the payment had they been deal ing wi th the t rust at arm's length

Inter vivos trust

An inter v ivos t rust is a t rust that is not a testamentary t rust .

Chart 1 – Types of Trusts

Type of trust

▲ Personal trust

General information This is a t rust (other than a t rust that is , or was at any t ime af ter 1999, a uni t t rust) that is one of the fo l lowing:

• a graduated rate estate

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• a t rust in which no benef ic ia l in terest was acquired for considerat ion payable d i rect ly or ind i rect ly to:

( i ) the t rust

( i i ) any person or par tnership that has made a contr ibut ion to the t rust by way of t ransfer , ass ignment or other d isposi t ion of property

For 2016 and subsequent tax years, only a graduated rate estate automat ical ly qual i f ies as a personal t rust wi thout regard to the c i rcumstances in which benef ic ia l in terest in the t rust has been acquired.

Type of trust

Alter ego trust

General information This is a t rust created af ter 1999 by a set t lor who was 65 years of age or o lder at the t ime the t rust was created, for which the set t lor is ent i t led to receive a l l the income that may ar ise dur ing h is or her l i fe t ime, and is the only person who can receive, or get the use of ,

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any income or capi ta l of the t rust dur ing the set t lor 's l i fe t ime. A t rust wi l l not be considered an a l ter ego t rust i f i t so e lects in i ts return for i ts f i rs t tax year

Type of trust

Specif ied trust ( for purposes of this guide only)

General information This is a t rust that is : an amateur ath lete t rust ; an employee l i fe and heal th t rust ; an employee t rust ; a master t rust ; a t rust governed by a deferred prof i t shar ing plan, an employee benef i t p lan, an employee prof i t shar ing p lan, a foreign ret i rement arrangement, a pooled registered pension p lan; a registered d isabi l i t y savings p lan; a registered educat ion savings p lan, a registered pension p lan, a registered ret i rement income fund, a registered ret i rement savings p lan, or a registered supplementary unemployment benef i t p lan; a tax- f ree savings account t rust ; a re lated segregated fund t rust ; a ret i rement compensat ion arrangement t rust ; a t rust whose d i rect benef ic iar ies are one of the above ment ioned t rusts; a t rust governed by an e l ig ib le funeral arrangement or a cemetery care

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t rust ; a communal organizat ion; and a t rust where a l l or substant ia l ly a l l o f the property is held for the purpose of provid ing benef i ts to indiv iduals f rom employment or former employment.

Type of trust

Joint spousal or common-law partner trust

General information This is a t rust created af ter 1999 by a set t lor who was 65 years of age or o lder at the t ime the t rust was created. The set t lor and the set t lor 's spouse or common- law par tner are ent i t led to receive a l l the income that may ar ise f rom the t rust before the later of thei r deaths. They are the only persons who can receive, or get the use of , any income or capi ta l of the t rust before the later of thei r deaths.

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Type of trust

▲ Spousal or common-law partner trust

General information A post-1971 spousal or common-law partner trust inc ludes both a testamentary t rust created af ter 1971, and an inter v ivos t rust created af ter June 17, 1971. In ei ther case, the l iv ing benef ic iary spouse or common- law partner is ent i t led to receive a l l the income that may ar ise dur ing the l i fe t ime of the spouse or common- law partner . That spouse or common- law partner is the only person who can receive, or get the use of , any income or capi ta l of the t rust dur ing h is or her l i fe t ime.

A pre-1972 spousal trust inc ludes both a testamentary t rust created before 1972, and an inter v ivos t rust created before June 18, 1971. In e i ther case, the benef ic iary spouse was ent i t led to receive a l l the income dur ing the spouse's l i fe t ime, and no other person received, or got the use of , any income or capi ta l of the t rust . These condi t ions must be met for the per iod beginning on the day the t rust was created, up to the earl iest o f the fo l lowing dates:

• the day the benef ic iary spouse dies

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• January 1, 1993

• the day on which the def in i t ion of a pre-1972 spousal t rust is appl ied

Type of trust

Deemed resident trust

General information A trust is deemed resident in Canada where there is one of the fo l lowing: • a " res ident contr ibutor" • a " res ident benef ic iary" under the t rust A res ident contr ibutor to a t rust at a par t icu lar t ime means a person that is , a t that t ime, res ident in Canada and has at or before that t ime made a contr ibut ion to the t rust . A res ident benef ic iary under a t rust at a par t icu lar t ime is a person (other than an "exempt person" or "successor benef ic iary") that , at that t ime, is a benef ic iary under the t rust , is res ident in Canada, and there is a "connected contr ibutor" to the t rust .

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A "connected contr ibutor" is a person who made a contr ibut ion ei ther whi le res ident in Canada, wi th in 60-months of moving to Canada, or wi th in 60-months of leaving Canada.

For tax years that ended before February 11, 2014, indiv iduals who had been resident in Canada for a per iod of , (or per iods the tota l of which is) 60 months or less were exempted f rom t reatment as res ident contr ibutors or connected contr ibutors. This exempt ion a lso appl ies to the tax years of non-resident t rusts that end before 2015 i f a l l o f the fo l lowing condi t ions are met:

• no contr ibut ions were made to the t rust af ter February 10, 2014 and before 2015

• at any t ime that is af ter 2013 and before February 11, 2014, the 60-month exempt ion appl ied in respect of the t rust

These t rusts are deemed resident for several purposes inc luding:

• f i l ing income tax returns and paying income tax under Part I of the Act

• wi thhold ing tax on amounts paid to non-residents under Part XI I I

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• cer ta in f i l ing obl igat ions re lat ing to ownership of fore ign proper ty, money received f rom or g iven to fore ign ent i t ies

The t rusts are NOT considered res ident for calculat ing a Canadian's l iab i l i t y when paying the t rust ( i .e . when a res ident taxpayer pays the deemed resident t rust i t is requi red to wi thhold Part XI I I ) . They are a lso not considered res ident for the purpose of determining a Canadian res ident 's (other than the t rust) fore ign report ing requirements.

I f you need help in determining whether the t rust is a deemed resident of Canada, cal l one of the te lephone numbers l is ted in "Non-resident t rusts and deemed resident t rusts" on page 93 [19] .

Type of trust

Unit trust

General information This is a t rust for which the interest of each benef ic iary can be descr ibed at any t ime by referr ing to uni ts of the t rust . A uni t t rust must a lso meet one of the three condi t ions descr ibed in subsect ion 108(2) of the Act .

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Type of trust

Communal organization

General information We consider a t rust to ex is t when a congregat ion meets a l l o f the fo l lowing condi t ions:

• has members who l ive and work together

• fo l lows the pract ices and bel ie fs of , and operates according to the pr inc ip les of , the re l ig ious organizat ion of which i t is a par t

• does not permi t i ts members to own property in thei r own r ight

• requires that i ts members devote thei r work ing l ives to the congregat ion 's act iv i t ies

• carr ies on one or more businesses d i rect ly, or owns a l l o f the shares of the capi ta l s tock of a corporat ion (except d i rectors ' qual i fy ing shares) , or every interest in a t rust or other person that carr ies on the business to suppor t or susta in i ts members or the members of another congregat ion

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The communal organizat ion has to pay tax as though i t were an inter v ivos t rust . However, i t can e lect to a l locate i ts income to the benef ic iar ies. For more informat ion, see Informat ion Circular IC78-5, Communal Organizat ions.

Type of trust

Retirement compensation arrangement (RCA)

General information This arrangement ex ists when an employer makes contr ibut ions for an employee's ret i rement , terminat ion of employment, or any s igni f icant change in serv ices of employment.

For more informat ion, see Guide T4041, Ret i rement Compensat ion Arrangements Guide.

Note : I f a t rusteed arrangement is compr ised of both an RCA and an employee benef i t p lan, you must f i le a T3 return for the por t ion of the arrangement that is t reated as an employee benef i t p lan. Form T3 RCA, Ret i rement Compensat ion Arrangement (RCA) – Part XI .3 Tax Return, has to be f i led for the RCA port ion.

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Type of trust

Mutual fund trust

General information This is a uni t t rust that res ides in Canada. I t a lso has to comply wi th the other condi t ions of the Act , as out l ined in sect ion 132 and the condi t ions establ ished by Income Tax Regulat ion 4801. For a mutual fund t rust that is a publ ic t rust , or publ ic investment t rust , there are cer ta in report ing requirements these types of t rusts must meet . For more informat ion, see below or go to canada.ca/cra-trust-administrators .

Public trust

A publ ic t rust is , a t any t ime, a mutual fund t rust of which i ts uni ts are l is ted, at that t ime, on a designated stock exchange in Canada.

Public investment trust

A publ ic investment t rust is , at any t ime, a t rust that is a publ ic t rust , where a l l or substant ia l ly a l l o f the fa i r market value of the property

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is , a t that t ime, at t r ibutable to the fa i r market value of proper ty of the t rust that is : • uni ts of publ ic t rusts • par tnership in terests in publ ic par tnerships • shares of the capi ta l s tock of publ ic corporat ions any combinat ion

of those propert ies • any combinat ion of those propert ies

Type of trust

Employee benefi t plan

General information General ly, th is is any arrangement under which an employer makes contr ibut ions to a custodian, and under which one or more payments wi l l be made to, or for the benef i t o f , employees, former employees, or persons re lated to them.

For more informat ion, and for deta i ls on what we consider to be an employee benef i t plan and how i t is taxed, see archived Interpretat ion

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Bul let in IT-502, Employee Benef i t P lans and Employee Trusts, and i ts Specia l Release. Note : An employee benef i t p lan has to f i le a return i f the p lan or t rust has tax payable, has a taxable capi ta l gain, or has d isposed of capi ta l property. Because the a l locat ions are taxed as income f rom employment to the benef ic iar ies, report the a l locat ions on a T4 sl ip , not on a T3 s l ip . For more informat ion, see Guide RC4120, Employers ' Guide – F i l ing the T4 Sl ip and Summary.

Type of trust

Salary deferral arrangement (SDA)

General information General ly, th is is a p lan or arrangement (whether funded or not ) between an employer and an employee or another person who has a r ight to receive salary or wages in a year af ter the serv ices have been performed. For more informat ion, see archived Interpretat ion Bul let in IT-529, F lex ib le Employee Benef i t Programs.

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Note : I f a salary deferra l arrangement is funded, we consider i t a t rust , and you may have to f i le a T3 return. The deferred amount is deemed to be an employment benef i t , so you report i t on a T4 sl ip , not on a T3 s l ip . The employee has to inc lude the amount in income for the year the serv ices are per formed. The employee also has to inc lude any interest , or other amount earned by the deferred amount . For more informat ion, see Guide RC4120, Employers ' Guide – F i l ing the T4 Sl ip and Summary.

Type of trust

Insurance segregated fund trust

General information This is a re lated segregated fund of a l i fe insurer for l i fe insurance pol ic ies and is considered to be an inter v ivos t rust . The fund's property and income are considered to be the property and income of the t rust , wi th the l i fe insurer as the t rustee.

Note : You have to f i le a separate return and f inancial statements for each fund. I f al l the benef iciar ies are ful ly registered plans, complete only the ident i f icat ion and cer t i f icat ion areas of the return and

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enclose the f inancia l s tatements. I f the benef ic iar ies are both registered and non-registered p lans, report and al locate only the income that appl ies to the non-registered p lans.

Type of trust

Employee trust General information This is a t rust . General ly, i t is an arrangement establ ished after 1979, under which an employer makes payments to a trustee in trust for the sole benefi t of the employees. The trustee has to elect to qual i fy the arrangement as an employee trust on the trust 's f i rst return. The employer can deduct contr ibut ions to the plan only i f the trust has made this elect ion and f i led i t no later than 90 days after the end of i ts f i rst tax year. To maintain i ts employee trust status, each year the trust has to al locate to i ts benefic iar ies al l non-business income for that year, and employer contr ibut ions made in the year. Business income cannot be al located and is taxed in the trust. For more informat ion, see archived Interpretat ion Bul let in IT-502, Employee Benef i t P lans and Employee Trusts, and i t 's Specia l Release.

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Note : An employee t rust has to f i le a return i f the p lan or t rust has tax payable, has a taxable capi ta l gain, or has d isposed of capi ta l property.

Because the a l locat ions are taxed as income f rom employment to the benef ic iar ies, report the a l locat ions on a T4 s l ip , not on a T3 s l ip . For more informat ion, see Guide RC4120, Employers ' Guide – F i l ing the T4 Sl ip and Summary.

Type of trust

Non-profi t organizat ion

General information This is an organizat ion (for example, club, society, or associat ion) that is usual ly organized and operated exclusively for social welfare, civic improvement, pleasure, recreat ion, or any other purpose except prof i t . The organizat ion wi l l general ly be exempt from tax i f no part of i ts income is payable to, or avai lable for, the personal benefi t of a propr ietor, member, or shareholder. For more informat ion, see archived Interpretat ion Bul let in IT-496, Non-Prof i t Organizat ions.

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I f the main purpose of the organizat ion is to provide services such as dining, recreat ional, or sport ing faci l i t ies to i ts members, we consider i t to be a trust . In this case, the trust is taxable on i ts income from property, and on any taxable capital gains from the disposit ion of any property that is not used to provide those services. The trust is al lowed a deduct ion of $2,000 when calculat ing i ts taxable income. Claim this on l ine 54 of the T3 return.

For more informat ion, see archived Interpretat ion Bul let in IT-83, Non-Prof i t Organizat ions – Taxat ion of Income From Property.

Note : A non-prof i t organizat ion may have to f i le Form T1044, Non-Prof i t Organizat ion (NPO) Informat ion Return. For more informat ion, see Guide T4117, Income Tax Guide to the Non-Prof i t Organizat ion (NPO) Informat ion Return.

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Type of trust

Master trust

General information This is a t rust . A t rust can e lect to be a master t rust i f dur ing the ent i re t ime since i ts creat ion i t met al l of the fo l lowing condi t ions:

• i t was res ident in Canada

• i ts only undertak ing was the invest ing of i ts funds

• i t never borrowed money except for a term of 90 days or less ( for th is purpose, the borrowing cannot be par t of a ser ies of loans or other t ransact ions and repayments)

• i t has never accepted deposi ts

• each of i ts benef ic iar ies is a t rust governed by a deferred prof i t shar ing p lan, a pooled registered pension p lan or a registered pension p lan

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Note : A master t rust is exempt f rom Part I tax. A t rust can e lect to be a master t rust by indicat ing th is in a let ter f i led wi th i ts return for the tax year the t rus t e lects to become a master t rust . Once made, th is e lect ion cannot be revoked. However, the t rust must cont inue to meet the condi t ions l is ted on page 47 [above] to keep i ts ident i ty as a master t rust . Af ter the f i rst T3 return is f i led for the master t rust , you do not have to f i le any fur ther T3 returns for th is t rust . I f a future return is f i led, we wi l l assume the t rust no longer meets the above condi t ions. The t rust wi l l not be considered a master t rust and must f i le year ly returns f rom then on. I f the t rust is wound up, send us a le t ter to te l l us the wind-up date.

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Type of trust

Registered ret irement savings plan (RRSP), or Registered ret irement income fund (RRIF) trusts

General information An RRSP, or RRIF t rust has to complete and f i le a T3 return i f the t rust meets one of the fo l lowing condi t ions:

• the t rust has borrowed money and paragraph 146(4)(a) or 146.3(3)(a) of the Act appl ies

• the RRIF trust received a gi f t of property and paragraph 146.3(3)(b) of the Act appl ies

• the last annui tant has d ied and paragraph 146(4)(c) or subsect ion 146.3(3.1) of the Act appl ies. I f th is is the case, c la im an amount on l ine 43 of the T3 return only i f the a l located amounts were paid in accordance wi th paragraph 104(6)(a.2) of the Act

I f the t rust does not meet one of the above condi t ions and the t rust held non-qual i f ied investments dur ing the tax year, you have to

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complete a T3 return to calculate the taxable income f rom non-qual i f ied investments, determined under subsect ion 146(10.1) or 146.3(9) of the Act . I f the t rust is report ing capi ta l gains or losses, i t has to report the fu l l amount ( that is , 100%) on l ine 01 of the T3 return. I f the t rust does not meet one of the above condi t ions and the t rust carr ied on a business, you have to complete a T3 return to calculate the taxable income of the t rust f rom carrying on a business. Do not inc lude the business income earned f rom qual i f ied investments for the t rust .

Type of trust

Registered disabi l i ty savings plan (RDSP) trust

General information An RDSP trust has to complete and f i le a T3 return i f the t rust has borrowed money and subparagraph 146.4(5)(a)( i ) or 146.4(5)(a)( i i ) o f the Act appl ies. I f th is does not apply and the t rust carr ied on a business or held non-qual i f ied investments dur ing the tax year, you have to complete a T3 return to calculate the taxable income f rom the business or non-qual i f ied investments, determined under

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subsect ion 146.4(5) of the Act . I f the t rust is report ing capi ta l gains or losses, i t has to report the fu l l amount ( that is , 100%) on l ine 01 of the T3 return.

Type of trust

Registered educat ion savings plan (RESP) trusts

General information I f an RESP trust held non-qual i f ied investments dur ing the tax year, you have to complete and f i le a T3 return to calculate the taxable income f rom non-qual i f ied investments, determined under subsect ion 146.1(5) of the Act . I f the t rust is report ing capi ta l gains or losses, i t has to report the fu l l amount ( that is , 100%) on l ine 01 of the T3 return.

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Type of trust

Specif ied investment f low-through (SIFT) trust

General information This is a t rust (other than a t rust that is a real estate investment t rust for the tax year or an ent i ty that is an excluded subsid iary ent i ty) that meets all o f the fo l lowing condi t ions at any t ime dur ing the tax year :

• the t rust is res ident in Canada

• investments in the t rust are l is ted or t raded on a stock exchange or other publ ic market

• the t rust holds one or more non-port fo l io propert ies

For more informat ion, go to canada.ca/cra-sif t - trust .

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Type of trust

Tax-free savings account (TFSA) trust

General information A TFSA trust has to complete and f i le a T3 return i f the t rust meets one of the fo l lowing condi t ion;

• I f a TFSA t rust carr ied on a business or held non-qual i f ied investments dur ing the tax year , the t rust wi l l be taxable to the extent of the income earned f rom that business or those investments (Type of t rust code 32 on the T3 Return) . For more informat ion, see "L ine 22" on page 199 [38] .

• When the last holder of a TFSA dies, and the t rust s t i l l ex is ts af ter the exempt per iod, i t is deemed to d ispose of a l l i ts property at fa i r market value and immediate ly reacquire i t a t the same value on January 1 fo l lowing the end of the exempt per iod. The t rust becomes a taxable in ter v ivos t rust f rom that point on (Type of t rust code 318 – TFSA – Qual i f ied Investments on the T3 Return) and subject to the normal ru les for inter v ivos t rusts. Addi t ional ly, in i ts f i rs t year as an inter v ivos t rust , the t rust is taxable on any

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income and gains earned but not d is t r ibuted dur ing the exempt per iod. For more informat ion go to canada.ca/tfsa .

Type of trust

Employee l i fe and health trust (ELHT) (establ ished after 2009)

General information This is a trust, establ ished by one or more employers, that meets a number of condit ions under subsect ion 144.1(2) of the Act. The trust 's only purpose is the payment of designated employee benef i ts (DEBs) for employees and certain related persons (certain l imitat ions apply to the r ights and benefi ts that may be provided to key employees).

Employers can deduct contr ibut ions made to the t rust , as long as they are for DEBs and meet the condi t ions in subsect ion 144.1(4) . Employee contr ibut ions are permit ted, but are not deduct ib le. However, employee contr ibut ions may qual i fy for the medical expense tax credi t , to the extent that they are made to a pr ivate heal th serv ices p lan.

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The trust can deduct amounts paid to employees or former employees for DEBs and can general ly carry non-capital losses back or forward three years. Any amount received from an ELHT must be included in income, unless the amount was received as the payment of a DEB. Payments of DEBs to non-resident employees or former employees wi l l general ly not be subject to tax under Part XI I I .

For more informat ion on ELHTs, designated employee benef i ts and key employees, see sect ion 144.1 of the Act .

Type of trust

Quali fying environmental trust (QET)

General information General ly, this is a trust resident in Canada or a province, or a corporat ion resident in Canada that is l icensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offer ing to the publ ic i ts services as trustee, or that is not an excluded trust and maintained at that t ime for the sole purpose of funding the reclamation of a qual i fying si te in Canada or in the province that is, or may become, required to be maintained under the

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terms of a qual i fying contract, or a qual i fying law, and that had been used pr imar i ly for , or for any combinat ion of :

• the operat ion of a mine

• the extract ion of c lay, peat , sand, shale or aggregates ( inc luding d imension s tone and gravel)

• the deposi t of waste

• I f the t rust was created af ter 2011, the operat ion of a p ipel ine, as long as the other requi rements def ined in subsect ion 211.6(1) are met

Under the def ini t ion, the trust is, or may become, required to be maintained under the terms of a contract entered into with the federal or provincial Crown or i f the trust was establ ished after 2011, by an order of a tr ibunal const i tuted under a federal or provincial law. Certain condit ions exist that may exclude a trust f rom being a QET. For more informat ion, please see the def ini t ion of a QET in subsect ion 211.6 (1) of the Act.

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Type of trust

Environment Qual i ty Act trust

General information A trust under paragraph 149(1)(z.1) of the Act . This is a t rust that was created because of a requirement imposed by sect ion 56 of the Envi ronment Qual i ty Act , R.S.Q., c . Q-2. The t rust must meet a l l o f the fo l lowing condi t ions:

• the t rust is res ident in Canada

• the only persons that are benef ic ia l ly in terested are one of the fo l lowing:

(A) Her Majesty in r ight of Canada

(B) Her Majesty in r ight of a province

(C) a munic ipal i ty (as def ined in sect ion 1 of that Act) that is exempt because of subsect ion 149(1) f rom tax under Part 1 on a l l o f i ts taxable income

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Type of trust

Nuclear Fuel Waste Act trust

General information A trust under paragraph 149(1)(z.2) of the Act . This is a t rust that was created because of a requirement imposed by subsect ion 9(1) of the Nuclear Fuel Waste Act . The t rust must meet a l l o f the fo l lowing condi t ions:

• the t rust is res ident in Canada

• the only persons that are benef ic ia l ly in terested are one of the fo l lowing:

(A) Her Majesty in r ight of Canada, one of the fo l lowing:

(B) Her Majesty in r ight of a province

(C) a nuclear energy corporat ion (as def ined in sect ion 2 of that Act) a l l the shares of the capi ta l s tock of which are owned by one or more persons descr ibed in c lause (A) or (B)

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(D) the waste management organizat ion establ ished under sect ion 6 of that Act i f a l l shares of i ts capi ta l s tock are owned by one or more nuclear energy corporat ions descr ibed in c lause (C)

(E) Atomic Energy of Canada Limi ted, being the company incorporated or acquired in accordance wi th subsect ion 10(2) of the Atomic Energy Contro l Act

Type of trust

Real estate investment trust (REIT)

General information A trust is a REIT for a tax year , i f i t is res ident in Canada throughout the year and meets a number of other condi t ions, inc luding a l l o f the fo l lowing: • at least 90% of the t rust 's non-port fo l io propert ies must be

qual i f ied REIT propert ies • at least 90% of the trust 's gross REIT revenue for the tax year must

be derived from rent, f rom real propert ies, interest, capital gains from disposi t ions of real propert ies which are capi ta l proper t ies, d isposi t ions of e l ig ib le resale propert ies, d iv idends and royal t ies

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• at least 75% of the t rust 's gross REIT revenues for the tax year must be der ived f rom rent f rom real propert ies, in terest f rom mortgages on real propert ies and capi ta l gains f rom disposi t ions of real propert ies which are capi ta l propert ies

Type of trust

Health and welfare trust (HWT)

General information Heal th and wel fare benef i ts for employees are somet imes provided through a t rust arrangement under which the t rustees receive the contr ibut ions f rom the employer(s) , and in some cases f rom employees, to provide such heal th and wel fare benef i ts as have been agreed to between the employer and the employees. To qual i fy for t reatment as a HWT, the funds of the t rust cannot revert to the employer or be used for any purpose other than provid ing heal th and wel fare benef i ts for which the contr ibut ions are made. In addi t ion, the employer 's contr ibut ions to the fund must not exceed the amounts required to provide these benef i ts . Fur ther , to qual i fy for t reatment as a HWT, the payments by the employer cannot be made

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on a voluntary or gratu i tous bas is – they must be enforceable by the t rustees should the employer decide not to make the payments required. This arrangement is restr ic ted to one or any combinat ion of the fo l lowing:

• a group s ickness or accident insurance p lan

• a pr ivate heal th serv ices p lan

• a group term l i fe insurance pol icy

Under proposed changes, star t ing in 2021, the CRA wi l l no longer apply i ts adminis t rat ive posi t ions wi th respect to HWTs. For more informat ion, see "What 's new" at the beginning of th is guide.

For more informat ion, see Income Tax Fol io S2-F1-C1, Heal th and Wel fare Trusts.

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Type of trust

Pooled registered pension plans (PRPP)

General information Pooled Registered Pension Plans must operate through an arrangement acceptable to the Minister. Al l property held in connect ion with a PRPP is required to be held in trust by the administrator on behalf of the plan members. As a result , a PRPP is general ly treated as a trust for tax purposes, the administrator is the trustee of that trust, the members are the beneficiar ies, and the trust property is the property held in connection with the plan. A pooled registered pension plan trust wi l l be excluded for purposes of the 21 year deemed disposit ion rule and other specif ied measures. When certain cr i ter ia are met, a pooled registered pension plan trust wi l l be exempt from Part 1 tax.

For more informat ion, go to canada.ca/taxes-pooled-registered-pension-plan.

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Type of trust

Lifetime benefi t trust

General information This is a t rust that is at any par t icu lar t ime a l i fe t ime benef i t t rust wi th respect to a taxpayer and the estate of a deceased indiv idual i f both of the fo l lowing condi t ions are met:

• immediate ly before the death of the deceased indiv idual , the taxpayer meets one of the fo l lowing condi t ions:

( i ) was both a spouse or common- law partner of the deceased indiv idual and mental ly in f i rm

( i i ) was both a chi ld or grandchi ld of the deceased indiv idual and dependent of the deceased indiv idual for support because of mental in f i rmi ty

• the t rust is , at the par t icu lar t ime, a personal t rust under which:

( i ) no person other than the taxpayer may receive or otherwise obta in the use of , dur ing the taxpayer 's l i fet ime, any of the income or capi ta l of the t rust

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( i i ) the t rustees:

(A) are empowered to pay amounts f rom the t rust to the taxpayer

(B) are required in determining whether to pay, or not to pay, an amount to the taxpayer to consider the needs of the taxpayer inc luding, wi thout l imi t ing the general i ty of the foregoing, the comfor t , care and maintenance of the taxpayer

Type of trust

Hepati t is C trust and Indian residential school trust

General information These are inter v ivos t rusts under paragraph 81(1)(g.3) of the Act and are government funded t rusts.

• establ ished under:

(A) the 1986-1990 Hepat i t is C Set t lement Agreement

(B) the Pre-1986/Post-1990 Hepat i t is C Set t lement Agreement

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(C) the Indian Resident ia l Schools Set t lement Agreement entered into by her Majesty in r ight of Canada on May 8, 2006

• as long as no contr ibut ion to the t rust , other than contr ibut ions provided for under the Agreement, is made before the end of a tax year of the t rust , the t rust 's income is general ly exempt f rom income tax for that tax year

Type of trust

Graduated rate estate (GRE)

General information A graduated rate estate, of an indiv idual at any t ime, is the estate that arose on and as a consequence of the indiv idual 's death, i f a l l o f the fo l lowing condi t ions are met:

• that t ime is no more than 36 months after the death of the indiv idual

• the estate is at that t ime a testamentary t rust

• the indiv idual 's socia l insurance number is provided in the estate 's return of income for the tax year that inc ludes that t ime and for

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each of i ts earl ier tax years that ended after 2015 (36 month per iod after the death of the indiv idual)

• the estate designates i tse l f as the graduated rate estate of the indiv idual in i ts return of income

• no other estate designates i tself as the graduated rate estate of that indiv idual in a return of income for a tax year that ends after 2015

An estate can only be a "graduated rate estate" for up to 36 months fol lowing the death of an indiv idual. The estate wi l l cease to be a graduated rate estate i f i t is st i l l in existence at the end of the 36 month per iod.

Type of trust

Quali f ied disabi l i ty trust (QDT)

General information A qual i f ied d isabi l i t y t rust for a tax year is a testamentary t rust that arose on the death of a par t icu lar indiv idual that jo int ly e lects (us ing Form T3QDT, Joint Elect ion for a Trust to be a Qual i f ied Disabi l i t y Trust) , wi th one or more benef ic iar ies under the t rust , in i ts T3

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return of income for the year to be a qual i f ied d isabi l i t y t rust for the year. In addi t ion, a l l o f the fo l lowing condi t ions have to be sat is f ied:

• the e lect ion must inc lude each elect ing benef ic iary's Socia l Insurance Number

• each e lect ing benef ic iary must be named as a benef ic iary by the par t icu lar indiv idual in the inst rument under which the t rust is created

• each e lect ing benef ic iary must , for the benef ic iary's tax year in which the t rust 's year-ends, be e l ig ib le for the disabi l i t y tax credi t

• no benef ic iary who e lects wi th the t rust to be a qual i f ied d isabi l i t y t rust for the year can e lect wi th any other t rust for the other t rust to be a qual i f ied d isabi l i ty t rust for the other t rust 's tax year that ends in the benef ic iary's tax year

• the t rust must be factual ly res ident in Canada ( i .e . , res ident determined wi thout regard to sect ion 94 of the Income Tax Act)

• the t rust is not subject to the recovery tax for the year

For a t rust that was a qual i f ied d isabi l i t y t rust in a previous tax year , refer to "L ine 11 – Federal recovery tax" on page 288 [54] .

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Code number for the type of trust A trust is e i ther a testamentary t rust or an inter v ivos t rust . Enter the code number for the type of t rust .

Testamentary trusts: • code 001 , for a Spousal or common- law partner t rust

• code 900 , for a testamentary t rust that is not ident i f ied by one of the other testamentary t rust codes

• code 901 , for a L i fet ime Benef i t t rust

• code 903 , for an estate that designated i tse l f as a graduated rate estate (appl icable for tax years ending af ter 2015)

• code 904 , for a qual i f ied d isabi l i t y t rust (appl icable for tax years ending af ter 2015 when Form T3QDT, Joint Elect ion for a Trust to be a Qual i f ied Disabi l i t y Trust is submit ted)

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Inter vivos trusts: • code 11 , for a Spousal or common- law partner t rust

• code 12 , for a Uni t t rust

• code 13 , for a Mutual fund t rust

• code 14 , for a Communal organizat ion t rust

• code 15 , for an Employee benef i t p lans t rust

• code 19 , for an Employee t rust

• code 20 , for a Bl ind/revocable t rust

• code 21 , for a Personal t rust

• code 22 , for a jo int Spousal or common- law par tner t rust

• code 23 , for an Al ter ego t rust

• code 24 , for a Master t rust

• code 28 , for a Speci f ied income f low-through (SIFT) t rust

• code 32 , for a Tax- f ree savings account (TFSA) t rust

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• code 33 , for an Employee l i fe and heal th t rust (ELHT)

• code 161 , for an Insurance segregated fund-fu l ly registered t rust

• code 162 , for an Insurance segregated fund-part ia l ly registered trust

• code 163 , for an Insurance segregated fund-non-registered

• code 180 , for a Non-prof i t organizat ion-subsect ion 149(5) t rust

• code 181 , for a Non-prof i t organizat ion t rust-subsect ion 149(1)( l )

• code 300 , Other t rust

• code 301 , for a Registered ret i rement savings p lan (RRSP) t rust l iab le for tax under Part I of the Act

• code 302 , for a Registered ret i rement income fund (RRIF) t rust l iab le for tax under Part I of the Act

• code 303 , for a Registered d isabi l i t y savings p lan (RDSP) t rust l iab le for tax under Part I of the Act

• code 304 , for a Real estate investment t rust (REIT)

• code 305 , for a Heal th and wel fare t rust (HWT)

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• code 306 , for a Salary deferra l arrangement (SDA)

• code 313 , for a Pooled registered pension p lans (PRPP)

• code 314 , for an Environment Qual i ty Act t rust descr ibed in paragraph 149(1)(z.1) of the Act

• code 315 , for a Nuclear Fuel Waste Act t rust descr ibed in paragraph 149(1)(z.2) of the Act

• code 316 , for an Hepat i t is C t rust descr ibed in paragraph 81(1)(g.3) of the Act

• code 317 , for an Indian res ident ia l schools t rust descr ibed in paragraph 81(1)(g.3) of the Act

• code 318 , for a Tax- f ree savings account (TFSA) t rust l iab le for tax under Part I o f the Act

• code 319 , for a Registered educat ion savings p lans (RESP) t rust l iab le for tax under Part I o f the Act

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▲ Who should fi le You have to f i le a T3 return i f income f rom the t rust property is subject to tax, and in the tax year, the t rust :

• has tax payable

• is requested to f i le

• is res ident in Canada and has e i ther d isposed of , or is deemed to have disposed of , a capi ta l proper ty or has a taxable capi ta l gain ( for example, a pr inc ipal res idence, or shares)

• is a non-resident throughout the year , and has a taxable capi ta l gain or has d isposed of taxable Canadian property

• is a deemed resident t rust

• holds property that is subject to subsect ion 75(2) of the Act

• has provided a benef i t o f more than $100 to a benef ic iary for upkeep, maintenance, or taxes for property mainta ined for the benef ic iary's use ( for more informat ion, see "L ine 43 – Upkeep, maintenance, and taxes of a property used or occupied by a benef ic iary" on page 144 [28] )

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• receives f rom the t rust property any income, gain, or prof i t that is a l located to one or more benef ic iar ies, and the t rust has:

– tota l income f rom al l sources of more than $500

– income of more than $100 al located to any s ingle benef ic iary

– made a d is t r ibut ion of capi ta l to one or more benef ic iar ies

– a l located any por t ion of the income to a non-resident benef ic iary

Examples 1. A T3 return must be f i led when a t rust does not have tax payable,

however the trust holds property that is subject to subsect ion 75(2) of the Act and f rom which the t rust received income, gains or prof i ts dur ing the year.

2. A T3 return must be f i led when the t rusts ' to ta l income f rom al l sources is less than $500, however the t rust made a d is t r ibut ion of capi ta l to one or more benef ic iar ies.

A t rust , whose residency status changes, wi l l re ta in the same t rust number.

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Where an e lect ing t rust has f i l ing obl igat ions under both i ts res ident por t ion t rust and non-resident por t ion t rust , i t is required to f i le these amounts separate ly under two d is t inct t rust numbers.

Tax t ip You may not have to f i le a return i f the estate is d is t r ibuted immediate ly af ter the person d ies, or i f the estate d id not earn income before the d is t r ibut ion. In these cases, you should g ive each benef ic iary a statement showing h is or her share of the estate.

Trust account number Trustees can now apply for a t rust account number before f i l ing thei r T3RET, T3 Trust Income Tax and Informat ion Return. A t rust account number is an ident i f ier s tar t ing wi th the let ter "T" fo l lowed by an e ight-d ig i t number.

Who can apply for a trust account number? The t rustee, which is an indiv idual or t rust inst i tu t ion that holds legal t i t le to property in t rust for the benef i t of the t rust benef ic iar ies, can apply for a t rust account number. The t rustee inc ludes an executor ,

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administ rator , assignee, receiver , or l iqu idator who owns or contro ls property for some other person.

Note This does not apply to a non-resident t rust e lect ing to f i le an income tax return under sect ion 216 of the Act .

How to apply for a trust account number?

Apply for a t rust account number us ing Form T3 APP, T3 Appl icat ion for Trust Account Number.

You can submit th is form onl ine in My Account at canada.ca/my-cra-account by using the "Submit Documents" serv ice. Your author ized representat ive can access th is onl ine serv ice through Represent a Cl ient at canada.ca/taxes-representat ives .

What information is needed?

To process your appl icat ion, we need a completed and signed Form T3 APP wi th a s igned copy of the trust document or wil l .

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Note Do not a t tach Form T3APP to your T3RET, T3 Trust Income Tax and Informat ion Return.

Once we have assigned a t rust account number to the t rust , we wi l l in form you of your t rust account number by mai l when your T3 APP form is processed. Inc lude th is number on a l l correspondence re lated to the t rust to s impl i fy deal ings wi th us. I f you want to author ize a person to apply for a t rust account number on your behal f , we need a completed and s igned Form T1013, Author iz ing or Cancel l ing a Representat ive. This form al lows us to deal wi th a person who is act ing as a representat ive for another person on income tax mat ters ( inc luding t rust accounts) . In order for the CRA to process the Form T1013, i t must be s igned by a l l jo int legal representat ives, i f appl icable. I f any of the legal representat ives are deceased or no longer wish to act as a jo int legal representat ive, make sure to inc lude the death cer t i f icate or a le t ter of renunciat ion f rom each representat ive.

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Production of trust account number For 2018 and subsequent taxat ion years, where a t rust f i les any return under the Act , i t has to prov ide the t rust account number that is assigned to i t .

Failure to provide the trust account number For 2018 and subsequent taxat ion years, where someone makes a request for the t rust account number to prepare an informat ion return under the Act , fa i lure to provide the informat ion wi l l resul t in a penal ty of $100 for each such fa i lure.

▲ What to f i le Trusts l is ted in "Chart 1 – Types of Trusts" beginning on page 30 [8] may have to f i le a T3 Trust Income Tax and Informat ion Return (T3 return) , and any re la ted schedules and statements, i f they meet the requirements l is ted in "Who should f i le" on page 73 [15] . The T3 return is f i led as both an income tax return, which calcula tes tax l iabi l i t y, and an informat ion return, which reports amounts al located and designated to benef ic iar ies. When the t rust f i les i ts f i rs t T3 return, at tach a copy of the wi l l or t rust document.

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You may a lso have to f i le the fo l lowing, depending on the type of amounts paid or a l located by the t rust .

• I f the trust al located amounts to resident benef iciar ies, f i le the T3 Summary, Summary of Trust Income Al locat ions and Designations and the related T3 sl ips. For more informat ion, see "Chapter 4 – T3 sl ip and summary" on page 315 [59] .

• I f the t rust paid executor , l iqu idator , or t rustee fees, or i f an employee benef i t p lan or an employee t rust made dis t r ibut ions other than a return of employee cont r ibut ions, f i le a T4 Summary, Summary of Remunerat ion Paid, and the re lated T4 s l ips, Statement of Remunerat ion Paid. For more informat ion, see Guide RC4120, Employers ' Guide – F i l ing the T4 Sl ip and Summary.

• I f the trust paid scholarships, fel lowships, bursaries, pr izes, or research grants to a resident of Canada, f i le a T4A Summary, Summary of Pension, Ret irement Annuity, and Other Income, and the related T4A sl ips, Statement of Pension, Retirement, Annuity, and Other Income. For more informat ion, see Guide RC4157, Deducting Income Tax on Pension and Other Income, and Fi l ing the T4A Sl ip and Summary.

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• I f the trust paid or credited, or is considered to have paid or credited, amounts to a non-resident benefic iary, f i le an NR4 Summary, Summary of Amounts Paid or Credited to Non-Residents of Canada, and the related NR4 sl ips, Statement of Amounts Paid or Credited to Non-Residents of Canada. For more information, see Guide T4061, NR4 – Non-Resident Tax Withhold ing, Remit t ing, and Report ing.

• I f the t rust paid fees to a non-resident of Canada for serv ices per formed in Canada and the non-resident acts in the capaci ty of an executor in the course of a bus iness, f i le a T4A-NR Summary, Fees, Commissions, or Other Amounts Paid to Non-Residents for Serv ices Rendered in Canada, and the re lated T4A-NR s l ips, Statement of Fees, Commissions, or Other Amounts Paid to Non-Residents for Serv ices Rendered in Canada. For more informat ion, see Guide RC4445, T4A-NR – Payments to Non-Residents for Serv ices Provided in Canada.

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Form T3-DD, Direct Deposit Request for T3 We can deposi t a t rust 's T3 refund into the t rust 's account at a f inancia l ins t i tu t ion in Canada.

To enrol for d i rect deposi t or to update a t rust 's banking informat ion, the t rustee or other author ized person can complete Form T3-DD, Direct Deposi t Request for T3, and send i t to the CRA. You can also s ign up for d i rect deposi t , or change your banking informat ion by f i l l ing out the "Direct Deposi t – Start or Change" area on the T3RET, Trust Income Tax and Informat ion Return, or on the T3 Specia l Returns forms. You also have to send us a void cheque or a le t ter / form stamped by the f inancia l inst i tu t ion showing that the account is in the name of the t rust . For more informat ion, go to canada.ca/cra-direct-deposit .

▲ When to fi le The f i l ing due date depends on the t rust 's tax year-end.

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Tax year-end and fiscal period

Graduated Rate Estate

For 2016 and later tax years, a graduated rate estate (GRE) can have a non-calendar tax year ( the per iod for which the accounts of the estate are made up for purposes of assessment). A GRE wi l l have a deemed tax year-end on the day on which the estate ceases to be a GRE, which wi l l be no later than the day on which the 36-month per iod af ter the death of the indiv idual ends. Later tax year-ends wi l l general ly be on a calendar year basis. For example, where an estate is created in 2015, and is a GRE in 2015, 16 and 17, a deemed year-end wi l l occur in 2018 on the 3 year anniversary of the individual 's date of death. The testamentary trust wi l l a lso have a tax year-end on December 31, 2018.

For tax years before 2016, a testamentary trust can have a non-calendar tax year but wi l l have a deemed tax year-end on December 31, 2015 (unless the trust is an estate that exists at the end of 2015 and is a GRE for i ts 2016 tax year).

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All other trusts For 2016 and later tax years, al l other trusts are general ly required to use a December 31 tax year-end. However, an exception is avai lable for mutual fund trusts that elect to have a December 15 year-end. A mutual fund trust that previously elected to have a December 15 year-end can revoke the elect ion. For more information, cal l 1-800-959-8281 .

Deemed year-end rules for al l trusts There are other s i tuat ions in which a t rust would be subject to a deemed year-end that may af fects i ts tax year-end. For example, i f a t rust ceased to be res ident in Canada on June 14, 2018, a deemed year-end would be t r iggered and the t rust would be considered to have a tax year f rom January 1 to June 14, 2018. For more informat ion, cal l 1-800-959-8281 .

Tax t ip For cer ta in testamentary and inter v ivos t rusts, a deemed taxat ion year-end wi l l occur upon the death of a par t icu lar benef ic iary of the t rust . For more informat ion on the due date for f i l ing the return and payment of tax for the deemed tax year-end, see Form T1055 sect ion on page 201 [39] .

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Fil ing dates

In the same calendar year, you have to f i le the T3 return, the re lated T3 s l ips, NR4 s l ips, and T3 and NR4 summaries no later than 90 days a f ter the t rust 's tax year-end (see "Tax year-end and f iscal per iod" on page 81 [on th is page] ) . You should a lso pay any balance owing no later than 90 days af ter the t rust 's tax year-end.

Tax t ip For Mutual Fund Trusts that f i led an e lect ion to have a tax year-end of December 15, where the pre- loss restr ic t ion event year-end is af ter December 15 in that calendar year , the NR4 return must be f i led wi th in 90 days a f ter the end of that December 15 tax year. In any other case, the NR4 return must be f i led wi th in 90 days af ter the end of the calendar year dur ing which the pre- loss restr ict ion event year-ends.

I f you do not have the informat ion s l ips you need to complete the return when i t is due, estimate the income. I f , af ter you receive the s l ips, you f ind your est imate d i f fers f rom the actual amounts, send the s l ips and a let ter to us, request ing an adjustment to the t rust 's income. For more informat ion, see "Reassessments" on page 100 [20] .

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I f you mai l the return f i rs t c lass, or i f you use an equivalent del ivery serv ice, we consider the date of the postmark on the envelope to be the day you f i led the return.

When the due date fa l ls on a Saturday, a Sunday, or a publ ic hol iday recognized by the CRA, we consider your payment to be on t ime i f we receive i t on the next business day. Your return is considered on t ime i f we receive i t or i f i t is postmarked on or before the next business day. For more in format ion, go to canada.ca/taxes-important-dates .

For in format ion on late- f i l ing penal t ies and interest on unpaid taxes, see "Penal t ies and interest" on page 94 [19] .

Deadline for distributing T3 sl ips – You must send the T3 s l ips to the benef ic iary's last known address no later than 90 days af ter the end of the t rust 's tax year . I f you have the informat ion you need to complete the s l ips before that deadl ine, we encourage you to send them to the benef ic iar ies as ear ly as possib le.

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Final return

For a testamentary trust that is a graduated rate estate , you have to f i le the f inal T3 return and pay any balance owing no later than 90 days after the t rust 's wind-up (d iscont inuat ion) date. Enter the wind-up date on page 2 [1] of the return.

I f you wind up a graduated rate estate , the tax year wi l l end on the date of the f inal d is t r ibut ion of the assets.

I f you wind up an inter vivos trust or a testamentary trust (other than a graduated rate estate) , you have to f i le the f inal T3 return and pay any balance owing no later than 90 days af ter the t rust 's tax year-end. However, you may want to f i le the f inal return before the t rust 's tax year-end.

In e i ther case, you should get a c learance cer t i f icate before you d is t r ibute the t rust property. For more informat ion, see "Clearance cer t i f icate" on page 107 [21] .

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▲ How to f i le the T3 return

Fil ing by Internet f i le transfer

Trust administ rators and thei r representat ives can f i le thei r T3 return e lectronical ly through the Internet f i le t ransfer method when the t rust 's taxable income, taxes payable and refundable credi ts are $0.00. This is the same method avai lable to you for f i l ing the t rust 's T3 sl ip and summary in Chapter 4.

Internet f i le transfer al lows you to transmit an or iginal T3 return with a maximum f i le size of 150 MB . Al l you need is a web browser to connect to the Internet, and your software wi l l create, pr int, and save your electronic return in XML format. For information about this f i l ing method, contact your sof tware publ isher or go to canada.ca/taxes-iref .

Web access code

To f i le your return over the Internet us ing the Internet f i le t ransfer , you wi l l need a web access code (WAC). I f you have misplaced or do not have a WAC, go to canada.ca/taxes-iref to access our web access code onl ine serv ice. I f you cannot get your WAC onl ine or

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would l ike to change i t , ca l l the Business Enquir ies l ine at 1-800-959-5525 .

Eligibi l i ty

In ternet f i le t ransfer is avai lable to most taxpayers and tax preparat ion serv ice providers when the t rust 's taxable income, tax payable and refundable credi ts are $0.00. However some except ions apply. For a l is t of except ions, see "Restr ic t ions" and "Other Restr ic t ions" below.

Restrict ions

There are cer ta in types of T3 returns that can' t be sent to the CRA electronical ly:

• an amended tax return

• a return for any taxat ion year before 2017

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You can' t use Internet f i le t ransfer to f i le your T3 return i f you meet one of the fo l lowing condi t ions:

• you are f i l ing a t rust income tax and informat ion return for the f i rs t t ime wi th the CRA and the CRA has not assigned you a t rust account number

• the trust is report ing taxable income, tax owing, or refundable credits

• the t rust went bankrupt in the year (does not inc lude a proposal for bankruptcy)

You can' t use Internet f i le t ransfer to change t rust in format ion, such as, the t rust 's :

• name

• legal representat ive ( t rustee/executor /administ rator)

• legal representat ive 's address

• a l ternate mai l ing address, i f d i f ferent f rom the legal representat ive 's address

• d i rect deposi t in format ion (nor can you request d i rect deposi t )

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Other restr ict ions

The fo l lowing is a l is t of speci f ic s i tuat ions that prevent you f rom f i l ing a tax return through the Internet f i le t ransfer serv ice:

• the t rust is a speci f ied investment f low-through (SIFT) t rust (Type of t rust code 028)

• for the re lated tax year, the t rust is subject to deemed disposi t ions as deta i led on Form T1055, Summary of Deemed Disposi t ions

• the t rust is report ing one of the fo l lowing:

– gross-up amounts of d iv idends on l ine 49 of the T3 return

– reserves on Schedule T3SCH2, Reserves on Disposi t ions of Capi ta l Property, or on l ine 15 of Schedule T3SCH1, Disposi t ions of Capi ta l Property

– capi ta l gains on g i f ts of cer ta in capi ta l property on Schedule T3SCH1A, Capi ta l Gains on Gi f ts of Certa in Capi ta l Property

– designat ions of taxable capi ta l gains e l ig ib le for deduct ion on l ine 930 of T3SCH9, Income Al locat ions and Designat ions to Benef ic iar ies

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• the t rust is subject to min imum tax and has a net adjusted taxable income for min imum tax ( l ine 28 of Schedule T3SCH12, Minimum Tax) that is greater than $0.00

• the trust is f i l ing Form RC199, Voluntary Disclosures Program (VDP) Taxpayer Agreement, or the taxpayer is making a request under the Voluntary Disclosures Program

Fil ing on paper Where you f i le the return depends on where the t rustee address is based in. General ly, we consider a t rust to res ide where the t rustee, executor , administ rator , l iqu idator , or other legal representat ive who manages the t rust or contro ls the t rust 's assets l ives. I t is the jur isd ict ion in which the cent ra l management and contro l is fac tual ly exerc ised that wi l l be considered in determining the residence of the t rust .

I f the trustee address is based in: Ontar io, New Brunswick, Nova Scot ia, Pr ince Edward Is land, Newfoundland and Labrador, and the remainder of the province of Quebec not l is ted under the Winnipeg Tax Centre,

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Send the return to:

Sudbury Tax Centre T3 Trust Returns Program 1050 Notre Dame Avenue Sudbury ON P3A 6C2

I f the trustee address is based in:

Mani toba, Saskatchewan, Alber ta, Br i t ish Columbia, Northwest Terr i tor ies, Yukon, Nunavut , Laval (Quebec), Montreal (Quebec) and Sherbrooke (Quebec)

Send the return to:

Winnipeg Tax Centre T3 Trust Returns Program PO Box 14003, Stat ion Main Winnipeg MB R3C 0N8

I f you have quest ions about resident trusts , cal l 1-800-959-8281 .

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Non-resident trusts and deemed resident trusts

Send the return to:

Winnipeg Tax Centre T3 Trust Returns Program PO Box 14003, Stat ion Main Winnipeg MB R3C 0N8 Canada

I f you have quest ions about non-resident trusts or deemed resident trusts , ca l l one of the fo l lowing numbers:

• Tol l f ree wi th in Canada and the cont inenta l USA: 1-800-959-8281 .

• From outs ide Canada and the cont inenta l USA – We accept col lect cal ls by automated response. Please note that you may hear a beep and exper ience a normal connect ion delay: 613-940-8495 .

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▲ Penalt ies and interest

Penalt ies

I f you do not f i le the t rust 's T3 return by the due date, we wi l l charge a late- f i l ing penal ty. The penal ty is 5% o f the unpaid tax plus 1% o f the unpaid tax for each fu l l month that the return is la te, to a maximum of 12 months . The t rust may st i l l be subject to a penal ty even i f a l l income has been al located and there are no taxes owing. The penal ty is $25 a day for each day the return is la te, f rom a minimum of $100 to a maximum of $2,500.

The late-f i l ing penalty wi l l be higher i f we issued a demand to f i le the return, and we assessed a late-f i l ing penalty for any of the three previous years' returns. In this case, the penalty may be 10% of the current year balance owing, plus 2% of the current year balance owing for each ful l month that the return is late, to a maximum of 20 months .

I f you d is t r ibute any t rust - re lated informat ion s l ip to a rec ip ient la te, the penal ty is $25 a day for each day the s l ip is late, f rom a minimum of $100 to a maximum of $2,500, for each fa i lure to comply wi th th is requirement .

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I f you are convicted of not f i l ing a return or s l ip as required, you are l iable to a f ine of $1,000 to $25,000, or to a f ine and impr isonment for a per iod of up to 12 months.

The minimum penal ty for fa i l ing to f i le a t rust- re lated informat ion s l ip by the due date is $100 and the maximum penal ty is $7,500. For more informat ion, go to canada.ca/penalty- information-returns .

Repeated fai lure to report income penalty

I f you fa i led to report an amount on your return for 2018 and you a lso fa i led to report an amount on your return for 2015, 2016, or 2017, you may have to pay a federal and provinc ia l or terr i tor ia l repeated fa i lure to report income penal ty. I f you d id not report an amount of income of $500 or more for a tax year , i t wi l l be considered a fa i lure to report income.

The federal and provinc ia l or terr i tor ia l penal t ies are each equal to the lesser of :

• 10% of the amount you fa i led to repor t on your return for 2018

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• 50% of the d i f ference between the understated tax (and/or overstated credi ts) re lated to the amount you fa i led to report and the amount of tax wi thheld re lated to the amount you fa i led to report

However, i f you voluntar i ly te l l us about an amount you fa i led to report , we may waive these penal t ies. For more informat ion, go to canada.ca/taxes-voluntary-disclosures .

False statements or omissions penalty

You may have to pay a penalty i f you knowingly or under c ircumstances amount ing to gross negl igence have made a fa lse statement or an omission on your 2018 return.

The penal ty is equal to the greater of :

• $100

• 50% of the understated tax and/or the overstated credi ts re lated to the fa lse statement or omission

The t rustee or tax preparer wi l l a lso be subject to penal t ies i f , due to culpable conduct , they prepare, or par t ic ipate in the preparat ion of ,

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income tax or in format ion returns, forms, or cert i f icates on behal f o f another person and make fa lse statements.

Interest

We pay compounded dai ly in terest on a tax refund star t ing on the latest o f :

• the 30th day af ter the return is due

• the 30th day af ter the return is f i led

• the day af ter the overpayment ar ises

We charge interest on unpaid amounts and the tota l amount of penal t ies assessed. We calculate th is in terest , compounded dai ly, a t a prescr ibed rate f rom the date the unpaid amount was due unt i l the date of i ts payment .

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Cancel or waive penalt ies or interest

The CRA administers legis lat ion, commonly cal led the taxpayer re l ie f provis ions, that g ives the CRA discret ion to cancel or waive penal t ies or in terest when taxpayers are unable to meet thei r tax obl igat ions due to c i rcumstances beyond thei r contro l .

The CRA's discret ion to grant re l ie f is l imi ted to any per iod that ended wi th in 10 calendar years before the year in which the request is made.

For penal t ies, the CRA wi l l consider your request only i f i t re lates to a tax year or f iscal per iod ending in any of the 10 calendar years before the year in which you make your request . For example, your request made in 2018 must re late to a penal ty for a tax year or f iscal per iod ending in 2008 or la ter .

For in terest on a balance owing for any tax year or f iscal per iod, the CRA wi l l consider only the amounts that accrued dur ing the 10 calendar years before the year in which you make your request . For example, your request made in 2018 must re late to in terest that accrued in 2008 or la ter .

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To make a request , f i l l out Form RC4288, Request for Taxpayer Rel ief – Cancel or Waive Penal t ies or Interest . For more informat ion about re l ie f f rom penal t ies or in terest and how to submit your request , go to canada.ca/taxpayer-rel ief .

Payment options Star t ing in October 2018, T3 payments can be made onl ine using CRA's My Payment serv ice wi th a Visa debi t , debi t MasterCard or Interac Onl ine card f rom a part ic ipat ing Canadian f inancia l ins t i tu t ion. For more informat ion go to canada.ca/cra-my-payment .

You can at tach to the f ront of the return, a cheque or money order payable to the Receiver General . Do not mail cash . To help us credi t the correct account , wr i te the t rust 's name and account number on the f ront of your payment . Enter on l ine 95, the amount of the payment .

I f you make a payment that your f inancia l inst i tu t ion does not honour, inc luding a cheque on which you put a stop payment, we wi l l charge you a fee. General ly, th is fee wi l l be $15 for each returned cheque, p lus interest , i f appl icable.

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I f you or your representat ive does not have a bank account at a f inancia l ins t i tu t ion in Canada, you or your representat ive can send your payment:

• us ing a wire t ransfer

• an internat ional money order drawn in Canadian dol lars

• a bank draf t in Canadian dol lars drawn on a Canadian bank

For more informat ion, go to canada.ca/payments or contact your f inancia l ins t i tu t ion.

▲ After you fi le Processing t imes

We can usual ly assess a T3 return wi th in seventeen weeks.

Reassessments

I f you need to change a return af ter you send i t to us, do not f i le another return for that tax year. Send us a completed Form T3-ADJ, T3 Adjustment Request , or a le t ter provid ing the deta i ls of the change.

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Indicate the t rust 's account number, the tax year you want us to change, and at tach any support ing documents.

You can submit Form T3-ADJ, T3 Adjustment Request onl ine in My Account at canada.ca/my-cra-account by us ing the "Submit documents" serv ice. Your author ized representat ive can access th is onl ine serv ice through Represent a Cl ient at canada.ca/taxes-representat ives .

We can reassess your return, make addi t ional assessments, or assess tax, in terest , or penal t ies wi th in one of the fo l lowing:

• three years (four years for mutual fund trusts) from the date of your or iginal not ice of assessment or a not ice that no tax was payable for the tax year ( this per iod is cal led the "normal reassessment period")

• six years (seven years for mutual fund trusts) from the date of your or iginal not ice of assessment to al low or change a carryback of certain deduct ions, such as a loss or an unused investment tax credit

Your request should be postmarked before the end of the above per iods for us to consider reassessing your return.

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The taxpayer re l ie f prov is ions permi t the CRA to issue income tax refunds or reduce income tax payable for indiv iduals and graduated rate estate beyond the normal three-year per iod. The CRA's d iscret ion to grant re l ief is l imi ted to any per iod that ended wi th in 10 years before the calendar year in which a request is submit ted or an income tax return is f i led.

Testamentary t rusts can st i l l benef i t f rom these provis ions for tax years that ended on or before December 31, 2015. We usual ly base our in i t ia l assessment on the income you report . Later , we may select the return for a more in-depth rev iew or audi t . We can a lso reassess a return at any t ime i f : • You have made a misrepresentat ion because of neglect ,

care lessness, wi l fu l defaul t , or f raud in e i ther f i l ing the return or supply ing in format ion required by the Act .

• You f i le Form T2029, Waiver in respect of the normal reassessment per iod or extended reassessment per iod, with your tax services off ice before the normal reassessment per iod expires. I f you want to revoke a waiver you previously f i led, f i le Form T652, Not ice of Revocation of Waiver. The revocat ion wi l l take effect six months after you f i le Form T652.

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I f requested by T3 Trusts Audi t , you can submit the documentat ion onl ine.

Tax Administrat ion Rules

For 2016 and subsequent tax years, the fo l lowing administ rat ion ru les, only avai lab le to GRE, extend the per iod:

• dur ing which the Canada Revenue Agency (CRA), may refund an overpayment of tax

• dur ing which, at the t rust 's request , the CRA may reassess or make determinat ions in respect of cer ta in income tax l iabi l i t ies

• for object ing to a tax assessment

• for f i l ing an agreement to t ransfer forg iven amounts under the debt forg iveness ru les

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How to register a formal dispute

I f you d isagree wi th your assessment or reassessment , you can make a formal object ion.

F i l ing an object ion is the f i rs t step in the formal process of resolv ing a d ispute. The t ime l imi t for f i l ing an object ion is as fo l lows:

• I f you are an indiv idual (other than a t rust) , or f i l ing for a graduated rate estate, the t ime l imit for f i l ing an object ion is ei ther one year af ter the due date for the return or 90 days af ter the date of the not ice of assessment or not ice of reassessment, whichever is la ter . I f you d id not f i le your object ion on t ime, you can apply for a t ime extension wi th in one year of your or ig inal t ime l imi t to f i le an object ion. You can apply by wr i t ing to the Chief of Appeals at your Appeals Intake Centre or by us ing My Account at canada.ca/my-cra-account i f you are an indiv idual , or My Business Account at canada.ca/my-cra-business-account i f you are a business owner. Inc lude the reasons why you were prevented f rom f i l ing on t ime.

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• In every other case, inc luding the assessment of taxes in respect of over-contr ibut ions to an RRSP or a TFSA, you have to f i le an object ion wi th in 90 days af ter the date of the not ice of assessment or not ice of reassessment.

You or your representat ive can choose to f i le your object ion by using one of these opt ions:

• making an onl ine submission in "Represent a Cl ient" at canada.ca/taxes-representat ives

• sending a completed Form T400A, Object ion – Income Tax Act , or a s igned let ter to the chief of appeals at your appeals in take centre

For more information about object ions and appeals to your income tax assessment or reassessment, go to canada.ca/cra-complaints-disputes .

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Elections

The taxpayer re l ie f prov is ions permi t the CRA to accept cer tain la te, amended, or revoked income tax e lect ions. This appl ies to both of the fo l lowing e lect ions that we d iscuss in th is guide:

• 164(6) e lect ion by an estate (see page 169 [33] )

• preferred benef ic iary e lect ion (see page 248 [47] )

A late, amended, or revoked e lect ion is subject to a penal ty of $100 for each complete month f rom the due date of the e lect ion to the date of the request . The maximum penal ty is $8,000.

For more informat ion about the taxpayer re l ie f prov is ions, go to canada.ca/taxpayer-rel ief .

What records do you have to keep? You have to keep your books, records, and support ing documents in case we need to ver i fy the income or loss you reported on the return. General ly, you must keep them for at least six years from the tax-year-end to which they relate. However, you can request permission to dispose of them before the end of th is per iod.

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For more informat ion, go to canada.ca/taxes-records , or see Information Circular IC78-10, Books and Records Retention/Destruct ion.

Clearance cert i f icate You can d is t r ibute property wi thout a c learance cer t i f icate, as long as you keep suf f ic ient property in the t rust to pay any l iab i l i t y to us. However, by get t ing a c learance cer t i f icate, you wi l l avoid being personal ly l iab le for unpaid taxes, in terest , and penal t ies.

We cannot issue a c learance cer t i f icate unt i l you have done both of the fo l lowing:

• f i led a l l the required returns and we have assessed them

• paid or secured a l l amounts owing

To ask for a c learance cer t i f icate, complete Form TX19, Asking for a Clearance Cert i f icate, and send i t to the Assistant Director , Audi t Div is ion, at your tax serv ices of f ice. Do not send Form TX19 unt i l you have received a not ice of assessment for each return.

For more informat ion, see Informat ion Circular IC82-6, Clearance Cert i f icate.

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Chapter 2 – Completing the return The T3 Trust Income Tax and Informat ion Return is a four-page form wi th re lated schedules. The fo l lowing informat ion wi l l he lp you to complete the return.

▲ Step 1 – Ident i f icat ion and other required information

Complete a l l i tems on page 1 of the return. The assessment of the return may be delayed i f you do not provide a l l the informat ion.

Residence of trust – A trust resides where i ts real business is carr ied on, which is where the central management and control of the trust actual ly takes place. For informat ion about the residence of a trust or estate, see Income Tax Fol io S6-F1-C1, Residence of a Trust or Estate.

Name of trust – Use the same name on al l returns and correspondence for the t rust . The name of the t rust wi l l be modi f ied to meet our requirements i f i t is longer than 60 characters.

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Mailing address – We may modify part of your address to meet Canada Post 's requirements. Therefore, the address on any cheques or correspondence we send you may be dif ferent from the one you indicate on the trust 's return. I f you include the name and mai l ing address of a contact person, we wi l l send any cheques or correspondence for the trust in care of that person.

Trust account number – I f we have assigned an account number to the t rust , enter i t in th is space. Inc lude th is number on a l l correspondence re lated to the t rus t . I f th is is the f i rs t return for the t rust , we wi l l issue an account number, which wi l l appear on the not ice of assessment.

Designated Aboriginal sett lement lands – I f the t rust res ides on designated Abor ig inal set t lement lands, answer yes , and enter the name and set t lement number in the spaces provided.

The set t lement lands and thei r numbers are as fo l lows:

Brit ish Columbia :

Nisga'a 09001

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Yukon :

Carcross/Tagish 11001

Champagne and Aishih ik 11002

Kluane 11003

Kwanl in Dun 11004

Li t t le Salmon/Carmacks 11006

Nacho Nyak Dun 11007

Selk i rk 11009

Ta'an Kwäch'än 11010

Tesl in T l ingi t 11011

Tr 'ondëk Hwëch' in 11012

Vuntut Gwitchin 11013

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Northwest Terr i tories :

Dél înê Got ' înê 10015

T l icho 10008

Newfoundland and Labrador :

Nunats iavut Government 00010

When you enter th is in format ion on the return, we wi l l t ransfer par t of any tax payable to the government of the Abor ig inal set t lement where the t rust res ides.

Date of residency – Provide the date the t rust became a res ident of Canada or ceased to be a res ident of Canada dur ing the tax year , i f appl icable.

Deemed resident trust – Indicate i f the t rust is a deemed resident t rust and provide the name of any other country in which the t rust is considered to be res ident . See the def in i t ion of a deemed resident t rust in "Chart 1 – Types of Trusts" on page 30 [8] .

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Type of trust – I t is important that you complete th is sect ion correct ly because we use th is in format ion to determine the correct rate of tax. To ident i fy the correct type of t rust , see "Chart 1 – Types of Trusts" beginning on page 30 [8] and "Code number for the type of t rust " on page 69 [15] . This in format ion is mandatory. I f th is in format ion is not entered, the process of the T3 return may be delayed.

Note

I f you enter in ter v ivos code 300, for other t rust , you must speci fy the type of t rust on the "Other in ter v ivos t rust (speci fy)" l ine.

Date of death ( i f the t rust is a testamentary t rust ) or Date trust was created ( i f the t rust is an in ter v ivos t rust) – Provide th is in format ion on each return.

Social Insurance Number of the deceased – I f the t rust is a testamentary trust, enter the Social Insurance Number of the deceased. The Social Insurance Number of the deceased individual is mandatory for graduated rate estates.

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Non-profit organization – I f the non-prof i t organizat ion is incorporated, enter the business program account.

Report ing foreign income and property

I f the t rust is res ident in Canada or deemed to be res ident in Canada, you have to report i ts income f rom al l sources, both ins ide and outs ide Canada.

I f a res ident t rust or a deemed res ident t rust conducts business wi th a fore ign af f i l ia te, or owns speci f ied fore ign property in excess of CAN$100,000, you may have to f i le specia l returns. For more informat ion, cal l 1-800-959-8281 .

Speci f ied fore ign proper ty inc ludes a l l o f the fo l lowing:

• funds or in tangib le property (patents, copyr ights, etc. ) s i tuated, deposi ted or held outs ide Canada

• tangib le property s i tuated outs ide Canada

• a share of the capi ta l s tock of a non-resident corporat ion he ld by the taxpayer or by an agent on behal f of the taxpayer

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• an interest in a non-resident t rust that was acquired for considerat ion, other than an interest in a non-resident t rust that is a fore ign af f i l ia te for the purposes of sect ion 233.4 of the Act

• shares of corporat ions res ident in Canada held by you for you outs ide Canada

• an interest in a par tnership that holds a speci f ied fore ign property unless the par tnership is requi red to f i le Form T1135, Foreign Income Ver i f icat ion Statement

• an interest in, or r ight with respect to, an ent i ty that is a non-resident

• a property that is convert ib le in to, exchangeable for , or confers a r ight to acquire a property that is speci f ied fore ign property

• a debt owed by a non-res ident , inc luding government and corporate bonds, debentures, mortgages, and notes receivable

• an interest in a fore ign insurance pol icy

• precious metals, gold cer t i f icates, and futures contracts held outs ide Canada

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Speci f ied fore ign proper ty does not inc lude any of the fo l lowing:

• a property used or held exclus ive ly in carrying on an act ive business

• a share of the capi ta l s tock or indebtedness of a fore ign af f i l ia te

• an interest in a t rust descr ibed in paragraph (a) or (b) of the def in i t ion of "exempt t rust" in subsect ion 233.2(1) of the Act

• a personal-use property as def ined in sect ion 54 of the Act

• an interest in , or a r ight to acquire, any of the above-noted excluded fore ign property

You can a lso f ind speci f ic in format ion on the fo l lowing forms:

• Form T1134, Informat ion Return Relat ing to Contro l led and Not-Contro l led Foreign Af f i l ia tes

• Form T1135, Foreign Income Ver i f icat ion Statement

• Form T1141, Informat ion Return in Respect of Contr ibut ions to Non-Resident Trusts, Arrangements or Ent i t ies

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• Form T1142, Informat ion Return in Respect of Dist r ibut ions f rom and Indebtedness to a Non-Resident Trust

You may be able to c la im a fore ign tax credi t when you calculate your federal , prov inc ia l or terr i tor ia l taxes. For more informat ion, see Form T3FFT, T3 Federal Foreign Tax Credi ts , and Form T3 PFT, T3 Provinc ia l or Terr i tor ia l Foreign Tax Credi t .

Other required information

Answer a l l the quest ions on page 2. The fo l lowing informat ion wi l l help you answer some of the quest ions.

Question 1 – I f the t rust is not a t rust to which sect ion 94 appl ies, do not answer th is quest ion.

Where a deemed resident t rust has received property f rom mul t ip le contr ibutors, i t may f i le an e lect ion to have cer ta in property that was not contr ibuted to the t rust by the res ident contr ibutors and/or , where there is a res ident benef ic iary, the connected contr ibutors, be par t of a separate t rust that is not subject to sect ion 94 ( the non-res ident por t ion t rust) . This e lect ion is non-revocable.

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I f the t rust is an e lect ing t rust , indicate what year the t rust became an e lect ing t rust . For the year indicated, inc lude a schedule showing al l o f the t rust 's assets and speci fy ing a l locat ion of assets between the res ident por t ion t rust and the non-resident por t ion t rust . Inc lude schedules for subsequent years only i f changes occur.

CRA considers the e lect ing t rust and i ts non-res ident por t ion t rust to be two separate t rusts. I f the non-resident por t ion t rust has any Canadian f i l ing obl igat ions under Part I or Part XI I I as a non-resident t rust , i t must report those amounts as a separate t rust under a separate t rust number f rom the deemed resident t rust .

Question 2 – The terms of the wi l l , t rust document, or court order determine the requirement to al locate income. The trust may be required to pay out i ts income to a benef ic iary. In this case, the income cannot be retained and taxed in the trust, unless the trust has made a designation under subsections 104(13.1) or 104(13.2). For more informat ion, see "Income to be taxed in the trust" on page 242 [46].

Question 3 – I f you answer yes , a t tach a statement g iv ing a l l required informat ion. For more informat ion, see "Dist r ibut ion of property to benef ic iar ies" on page 166 [32] .

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Question 4 – I f you answer yes , a t tach a statement g iv ing a l l required informat ion only i f the t rust is a personal t rust , spousal or common law partner t rust , jo int spousal or common law par tner t rust , or a l ter ego t rust .

Question 5 – This quest ion re lates to spousal and s imi lar t rusts under subsect ion 104(13.4) and for purposes of th is quest ion, a l i fe t ime benef ic iary under the t rust is :

• the last surv iv ing benef ic iary (e i ther the set t lor , or the spouse or common- law partner , as the case may be) of an a l ter ego t rust , a jo int spousal or common- law partner t rust , or a spousal or common-law partner t rust

• an indiv idual (other than a t rust) who t ransferred property in c i rcumstances descr ibed in subparagraph 73(1.02(b)( i i ) or subsect ion 107.4(1)

Question 6 – For in format ion about debts incurred in non-arm's length t ransact ions, see archived Interpretat ion Bul let in IT-406, Tax Payable by an Inter Vivos Trust .

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Question 7 – I f you answer yes , provide the date and at tach a statement showing the changes. For in format ion on the d isposi t ion of an income interest in a t rust , see Income Tax Fol io S6-F2-C1, Disposi t ion of an Income Interest in a Trust .

Question 8 – A yes response to th is quest ion only appl ies to personal t rusts.

Question 9 – "Contr ibut ion of property" is def ined on page 22 [6] .

Question 10 – A yes response to this quest ion only appl ies to a mutual fund t rust .

Question 11 – I f a t rust used Internat ional F inancia l Report ing Standards (IFRS) when i t prepared i ts f inancial statements, answer yes .

IFRS is the col lect ion of f inancial report ing standards developed by the Internat ional Account ing Standards Board (IASB). For more informat ion, go to canada.ca/en/revenue-agency/services/tax/businesses/topics/ international-f inancial-reporting-standards-ifrs.html .

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Question 12 – I f you answer yes , prov ide the date of the loss restr ic t ion event . For more informat ion, see "Loss t rading – Rules for t rusts" on page 148 [29] .

Step 2 – Calculating total income: Lines 01 to 20

Line 01 – Taxable capi ta l gains

Calculate the taxable capi ta l gains and al lowable capi ta l losses of the t rust on Schedule 1.

I f the amount on l ine 23 of Schedule 1 is a taxable capi ta l gain, enter i t on l ine 01.

I f the amount on l ine 23 of Schedule 1 is a net capi ta l loss, do not enter i t on l ine 01. You cannot deduct the net capi ta l loss f rom other income of the t rust in the year , or a l locate i t to the benef ic iar ies (except as descr ibed under "Except ions and l imi ts to income al locat ions" on page 235 [44] ) . You can only use i t to reduce the t rust 's taxable capi ta l gains of other years. For more informat ion, see "L ine 52 – Net capi ta l losses of other years" on page 151 [30] .

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Tax t ip In the f i rs t tax year of a GRE, the legal representat ive can e lect to apply any net capi ta l loss against income on the deceased's f inal return. For more informat ion, see "Graduated rate estate e lect ions ( losses)" on page 167 [33] .

I f a trust sel ls capital property that is qual i f ied farm or f ishing property, or qual i f ied smal l business corporat ion shares and real izes a gain, the gain may qual i fy for the capital gains deduct ion to be claimed by a benef iciary of the trust. For more informat ion, see "Line 921 – Taxable capital gains" on page 257 [49] .

For more informat ion, see:

• Guide T4037, Capi ta l Gains

• Guide T4002, Sel f -employed Bus iness, Professional , Commission, Farming, and Fishing Income

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▲ L ine 02 – Pension income

Enter amounts that the t rust received f rom any the fo l lowing:

• registered pension p lans

• ret i rement compensat ion arrangements

• deferred prof i t shar ing plans

• superannuat ion p lans

• fore ign ret i rement arrangements

When an amount is considered to have been dist r ibuted to an estate f rom a fore ign ret i rement arrangement according to the laws of the country where the arrangement was establ ished, the payment is a lso deemed received by the estate for tax purposes in Canada. In th is case, you must inc lude the amount , in Canadian funds, on l ine 02.

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▲ L ine 03 –Total of actual amount of d iv idends f rom taxable Canadian corporat ions Enter the tota l of the actual amount of d iv idends received f rom taxable Canadian corporat ions f rom l ine 3 of Schedule 8. On l ine 3A, enter the actual amount of d iv idends other than e l ig ib le d iv idends f rom l ine 1 of Schedule 8. Attach al l information sl ips received. For more informat ion, see "L ines 1 to 3 – Div idends f rom taxable Canadian corporat ions" on page 215 [41] .

▲ L ine 04 – Foreign investment income Enter a l l in terest and other investment income f rom fore ign sources f rom l ine 6 of Schedule 8. For more informat ion, see the tax t ip on page 123 [below] and "L ines 4 to 6 – Foreign investment income" on page 216 [41] .

▲ L ine 05 – Other investment income Enter the amount f rom l ine 12 of Schedule 8.

Inc lude a l l in terest and investment income f rom Canadian sources except d iv idends f rom taxable Canadian corporat ions reported on

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l ine 03. At tach a l l in format ion s l ips received. For more informat ion, see "L ines 7 to 12 – Other investment income" on page 217 [42] .

Tax t ip In the f i rs t year of a testamentary t rust , any interest income that has accrued to the person's date of death is reported on the deceased's f inal return. Any interest income accrued af ter the person's date of death is reported on the T3 Trust Income Tax and Informat ion Return.

Thin capitalization – Rules for trusts The scope of the appl icat ion of the th in capi ta l izat ion ru les wi l l be extended to:

• Canadian-res ident t rusts

• non-resident corporat ions and t rusts that operate in Canada

These measures wi l l a lso apply where a Canadian-resident t rust or a non-resident t rust is a member of a par tnership.

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Canadian resident trusts

A t rust 's "equi ty" for the purposes of the th in capi ta l izat ion ru les wi l l general ly consist of contr ibut ions to the t rust f rom speci f ied non-residents p lus the tax-paid earnings of the t rust , less any capi ta l d is t r ibut ions f rom the t rust to speci f ied non-residents. The permit ted 1.5- to-1 debt- to-equi ty rat io wi l l remain unchanged.

Trust beneficiar ies wi l l be used in place of shareholders for the purpose of determining whether a person is a specif ied non-resident in respect of the trust and, therefore, whether a debt owing to that person is included in the trust 's outstanding debt to specif ied non-residents. The current rules deal ing with r ights to acquire shares in determining who is a specif ied shareholder wi l l be modif ied to address discret ionary powers.

Where interest expense of a t rust is not deduct ib le as a resul t o f the appl icat ion of the th in capi ta l izat ion ru les, the t rust wi l l be ent i t led to designate the non-deduct ib le interest as a payment of income of the t rust to a non-resident benef ic iary ( i .e . , the rec ip ient of the non-deduct ib le in terest) . In such a case, the t rust wi l l be able to deduct the designated payment in comput ing i ts income, but the

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designated payment wi l l be subject to non-resident wi thhold ing tax under Part XI I I o f the Income Tax Act and potent ia l ly tax under Part XI I .2, depending on the character of the income earned by the t rust .

The thin capital izat ion rules apply to partnerships in which a Canadian resident trust is a member. As with debt owed direct ly by the trust, where these rules result in an amount being included in computing the income of a trust, the trust is ent i t led to designate the included amount as having been paid to a non-resident benef iciary as income of the trust.

S ince some t rusts may not have complete h is tor ica l in format ion, any t rust that ex is ts on March 21, 2013 are able to e lect to determine the amount of i ts equi ty for th in capi ta l izat ion purposes as at March 21, 2013 based on the fa i r market value of i ts assets less the amount of i ts l iab i l i t ies. Each benef ic iary of the t rust would then be considered to have made a contr ibut ion to the t rust equal to the benef ic iary's share (determined by reference to the re lat ive fa i r market value of thei r benef ic ia l in terest in the t rust) of th is deemed t rust equi ty. Contr ibut ions to the t rust , tax-paid earnings of the t rust and

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d is t r ibut ions f rom the t rust on or af ter March 21, 2013 would then increase or decrease (as appropr iate) t rust equi ty for th in capi ta l izat ion purposes.

This measure appl ies to tax years that begin af ter 2013 and appl ies wi th respect to exis t ing as wel l as new borrowings.

Non-resident trusts

Since a Canadian branch is not a separate person from the non-resident corporat ion or trust, the branch does not have shareholders or equity for purposes of the th in capi ta l izat ion ru les. Therefore, the th in capi ta l izat ion ru les for non-resident corporat ions and t rusts wi l l d i f fer f rom the ru les for Canadian-resident corporat ions in cer ta in respects. For example, a debt- to-asset rat io of 3- to-5 wi l l be used, which paral le ls the 1.5- to-1 debt- to-equi ty rat io used for Canadian-resident corporat ions.

A loan that is used in a Canadian branch of a non-resident corporat ion or t rust wi l l be an outstanding debt to a speci f ied non-resident for th in capi ta l izat ion purposes i f i t is a loan f rom a non-resident who does not deal at arm's length wi th the non-resident corporat ion or t rust .

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A non-resident corporat ion or trust that earns rental income from certain Canadian propert ies may elect to be taxed on i ts net income under Part I of the Income Tax Act rather than being subject to non-resident withholding tax under Part XII I on i ts gross rental income. The elect ion al lows the non-resident to compute i ts taxable income as i f i t were a res ident of Canada, wi th such modi f icat ions to the tax ru les as the c i rcumstances require. Where an e lect ion is made, the th in capi ta l izat ion ru les for non-resident corporat ions and t rusts, rather than those for Canadian residents, wi l l apply in comput ing the non-resident 's Part I tax l iabi l i t y.

The th in capi ta l izat ion ru les apply to par tnerships in which a non-resident corporat ion or t rust is a member. Any income inc lusion for a non-resident par tner that ar ises as a consequence of the appl icat ion of the th in capi ta l izat ion ru les is deemed to have the same character as the income against which the partnership 's in terest deduct ion is appl ied.

This measure appl ies to tax years that begin af ter 2013 and appl ies wi th respect to exis t ing as wel l as new borrowings.

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Lines 06, 07, and 09 – Business, farming or f ishing, and rental income

Enter on the appropr iate l ines, the t rust 's gross and net income or loss f rom business, farming, f ish ing, and renta ls . I f the amount is a loss, report i t in brackets. I f the t rust is a member of a par tnership, enter the partnership's tota l gross income and the trust 's share of the par tnership 's net income or loss. At tach the appropr iate forms or s tatements to the T3 return.

I f a t rust (other than a graduated rate estate) operates a business wi th a tax year-end other than December 31, specia l ru les apply for calculat ing income. For more informat ion, see Guide RC4015, Reconci l ia t ion of Business Income for Tax Purposes, to calculate the income to report .

You have to fol low certain rules when report ing business, farming, f ishing, and rental income. The fol lowing publ icat ions contain more informat ion and the forms you may need to calculate the trust 's income:

• Guide T4002, Sel f -employed Bus iness, Professional , Commission, Farming, and Fishing Income (Form T2125, Statement of Business or Professional Act iv i t ies, Form T2042, Statement of Farming Act iv i t ies, and Form T2121, Statement of F ishing Act iv i t ies).

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• Guide T4036, Rental Income (Form T776, Statement of Real Estate Rentals) .

I f the t rust is a member of the Agr i Invest Fund 2, cal l 1-866-367-8506 to f ind out which form you should use to report farming income.

Line 10 – Agr i Invest Fund 2

Use the calculat ion in th is sect ion to report a l l amounts received, and those deemed to have been received by the t rust out of i ts Agr i Invest Fund 2. This fund is the por t ion of a farm producer 's net income stabi l izat ion account that comes f rom th i rd-par ty sources, such as interest , bonuses, and government contr ibut ions.

The t rust should receive an AGR-1 s l ip , Statement of Farm-Support Payments, (Agr i Invest Fund 2 amounts are reported in Box 18) for a l l farm support -programs f rom which i t received payments of more than $100. These inc lude programs administered by the federal , provinc ia l , terr i tor ia l , and munic ipal governments, and producer associat ions. Part ic ipants in the Agr i-Quebec program must also inc lude in income, any amounts wi thdrawn f rom thei r Agr i -Quebec

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Fonds 2. The t rust should receive an RL-21 s l ip , Farm Support Payments (Agr i -Quebec Fonds 2 amounts are reported in Box D).

Note In this Guide and the T3 return, any reference to Agri Invest Fund 2 is a reference to Agr i Invest Fund 2 and includes Agr i-Quebec Fonds 2.

An Agr i Invest Fund 2 amount can be t ransferred to a testamentary post-1971 spousal or common- law par tner t rust when the set t lor d ies. I f the benef ic iary spouse or common- law partner d ies, the t rustee has to report a deemed payment on the day the benef ic iary spouse or common- law partner d ies. The deemed payment is equal to the fund's balance at the end of the day of death. The ru les re lated to the death of a benef ic iary of a spousal or s imi lar t rust have been amended in 2016. For more informat ion, see "Deemed disposi t ion" on page 201 [39] .

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The t rust has to report on l ine 10, the amount , i f any, determined by the fo l lowing calculat ion:

A – (B – C)

where:

A = the amount paid in the year out of the program (or deemed to have been paid out of the Agr i Invest Fund 2, such as on the death of the benef ic iary spouse or common- law partner)

B = the tota l of a l l amounts prev iously deemed to have been paid out of the Agr i Invest Fund 2 to the t rust , or to the benef ic iary spouse or common- law partner , or out of another person's Agr i Invest Fund 2 on being t ransferred to the t rust

C = the tota l of a l l amounts previously appl ied to reduce income out of the Agr i Invest Fund 2

Make separate calculat ions for each amount e i ther paid or deemed paid.

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Agr i Invest Fund 2 payments are taxable in the t rust . They cannot be a l located to benef ic iar ies, except for :

• amounts that re late to payments received by a testamentary spousal or common- law par tner t rust whi le the benef ic iary spouse or common- law partner was st i l l a l ive

• amounts received by a communal organizat ion

Use the space below l ine 10 to show any of the amounts on that l ine relat ing to payments received by the benef iciary spouse or common-law partner whi le he or she was, or is s t i l l a l ive, or by a communal organizat ion.

For more informat ion, see Guide T4002, Sel f -employed Business, Professional , Commission, Farming, and Fishing Income.

Line 11 – Deemed disposi t ions income or losses

Enter the t rust 's tota l income or losses resul t ing f rom deemed disposi t ions f rom l ine 42 of Form T1055, Summary of Deemed Disposi t ions (2002 and later tax years) . For more informat ion, see "Deemed disposi t ion" on page 201 [39] .

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▲ L ine 19 – Other income

Enter the tota l income the t rust received in the tax year that is not inc luded elsewhere on the return or schedules, such as:

• royal t ies (do not inc lude Crown royal t ies in income)

• commissions

• death benef i ts under the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)

• ret i r ing a l lowances, unless th is amount is reported by a benef ic iary, or reported in the ret i red person's income for the year of death as a r ight or thing ( for more in format ion, see archived Interpretat ion Bul let in IT-337, Ret i r ing Al lowances)

• cer ta in employment-re la ted income ( for more informat ion, see Guide T4011, Prepar ing Returns for Deceased Persons)

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Death benefi t – Other than CPP or QPP

A death benef i t is an amount for a deceased person's employment serv ice. This amount is shown in box 106 of a T4A s l ip . I f a death benef i t is to be taxed in the trust according to the provisions of the trust document, you may be able to exclude up to $10,000 of the amount from the trust 's income.

I f no one other than a trust received a death benefi t , report the amount that is more than $10,000. Even i f the trust did not receive al l of the death benef i ts in one year, the total tax-free amount for al l years cannot exceed $10,000. To f ind out what to report i f anyone else received a death benef i t for the same person, see archived Interpretat ion Bul let in IT-508, Death Benefi ts.

At tach a copy of the T4A s l ip , or a statement f rom the deceased person's employer that ident i f ies the payment as a death benef i t .

Registered ret irement savings plan (RRSP)

A trust may be ent i t led to income earned by an RRSP af ter the death of the only or last annui tant . Usual ly, th is income is shown on a T5 or T4RSP sl ip issued to the estate. Inc lude th is amount on l ine 19 of

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the return. General ly, amounts deemed received on death or as a refund of premiums should not be inc luded.

For more informat ion on taxable benef i ts f rom matured and unmatured RRSPs, see Guide T4040, RRSPs and Other Registered Plans for Ret i rement, Guide T4011, Prepar ing Returns for Deceased Persons, and archived Interpretat ion Bul le t in IT-500, Registered Ret i rement Savings Plans – Death of an Annui tant .

Step 3 – Calculating net income: Lines 21 to 50

▲ L ine 21 – Carrying charges and interest expenses

Enter the tota l carry ing charges f rom l ine 17 of Schedule 8. For more informat ion, see "L ines 13 to 17 – Carrying charges and interest expenses" on page 219 [42] .

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Lines 22 to 24 – Trustee fees

Trustee, executor , and l iqu idator fees inc lude:

• fees paid for cer ta in investment advice ( for more informat ion, see archived Interpretat ion Bul let in IT-238, Fees Paid to Investment Counsel)

• fees incurred to gain or produce bus iness or property income (deducted when you calculate the t rust 's business or property income)

• fees for administer ing the t rust or looking af ter real property ( for example, a res idence) used by a l i fe t ime benef ic iary of a testamentary t rust (because these fees are not incurred to earn business or property income, you cannot deduct them from the income of the t rust)

Whether or not these fees are deduct ib le by the t rust , they are st i l l income to the rec ip ient . For th is reason, you have to inc lude the tota l fees paid in the year on l ine 22.

On l ine 23, enter the fees that were not incurred to earn income or that were a l ready deducted e lsewhere on the return.

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Trustee, executor, or l iquidator fees paid to a person who acts in the capacity of an executor in the course of a business are part of that indiv idual 's business income. You must report these amounts on a T4A sl ip. I f the trust paid fees to a non-resident of Canada for services performed in Canada and the non-resident acts in the capacity of an executor in the course of a business, complete a T4A-NR sl ip. For more informat ion, see Guide RC4445, T4A-NR – Payments to Non-Residents for Services Provided in Canada – 2018. Otherwise, the fee for act ing as executor is income from an off ice. I f the fees paid are $500 or more, you have to prepare a T4 sl ip for that indiv idual. The indiv idual reports these amounts as income from an off ice, even i f he or she does not receive a T4 sl ip. For more information, see Guide RC4120, Employers ' Guide – F i l ing the T4 Sl ip and Summary.

Line 25 – Al lowable business investment losses (ABIL)

I f the t rust had a business investment loss, you can deduct a par t of that loss f rom income. We cal l the deduct ib le por t ion an ABIL. I t resul ts f rom the actual or deemed disposi t ion of cer ta in capi ta l propert ies. This can happen i f the t rust has d isposed of , or is deemed

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to d ispose of , one of the fo l lowing to a person wi th whom i t deals at arm's length:

• a share or debt of a smal l business corporat ion

• a bad debt owed to i t by a smal l business corporat ion

For more informat ion, see Guide T4037, Capi ta l Gains.

You can deduct the ABIL f rom the t rust 's other sources of income for the year. I f the ABIL is more than the other sources of income for the year, the d i f ference is a non-capi ta l loss for the year. For more informat ion, see "L ine 51 – Non-capi ta l losses of other years" on page 150 [29] .

I f you cannot deduct the ABIL as a non-capi ta l loss wi th in the a l lowed t ime f rame, the unappl ied par t becomes a net capi ta l loss in the 11th year . You can then use i t to reduce the t rust 's taxable capi ta l gains in the 11th year or any fo l lowing year.

Reduction in business investment loss – I f the t rust designated par t or a l l o f i ts e l ig ib le taxable capi ta l gains for the purpose of the capi ta l gains deduct ion to a benef ic iary in a previous year, you have to reduce the business investment loss for the current year .

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Use the chart below [on the next page] to calculate the reduct ion in business investment loss. I f the trust had more than one business investment loss in the year, use this chart to calculate the total reduct ion.

For more informat ion, see archived Interpretat ion Bul let in IT-484, Business Investment Losses.

Allowable Business Investment Loss and Reduction

You have to adjust the amount of e l ig ib le taxable capi ta l gains on l ines 1 to 7, because they were inc luded in income at d i f ferent rates in previous years.

Tota l e l ig ib le taxable capi ta l gains designated by the t rust in 1985, 1986, and 1987 × 2 = + 1

Total e l ig ib le taxable capi ta l gains designated by the t rust in 1988 and 1989; do not inc lude el ig ib le capi ta l property on th is l ine

× 3/2 = + 2

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Tota l deemed taxable capi ta l gains f rom el ig ib le capi ta l property designated by the t rust in 1988 and 1989 × 4/3 = + 3

Total e l ig ib le taxable capi ta l gains designated by the t rust in years af ter 1989 and before 2000

× 4/3 = + 4

Total e l ig ib le taxable capi ta l gains designated by the t rust in 2000 (see Note)

× = + 5

Total e l ig ib le taxable capi ta l gains designated by the t rust in 2001 (see Note)

× = + 6

Total e l ig ib le taxable capi ta l gains designated by the t rust in years af ter 2001

× 2 = + 7

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Add l ines 1 to 7 = 8

Total amount you used to reduce the t rust 's business investment losses in years af ter 1985 and before 2018 – 9

Line 8 minus l ine 9 = 10

Business investment losses for the year before reducing the losses 11

Enter the amount f rom l ine 10 or l ine 11, whichever is less . This is the reduct ion for the year.

(Enter th is amount on l ine 12 of Schedule 1. ) – 12

Business investment losses for the year : l ine 11 minus l ine 12 = 13

Allowable business investment losses for the year: l ine 13 ( ) × 1/2 = 14

(Enter th is amount on l ine 25 of the return.)

– 143 –

Note: The f ract ions to be used at l ines 5 and 6 are the inverse of the t rust 's inc lus ion rates for 2000 and 2001. For example, i f the t rust 's inc lus ion rate was 1/2, the inverse is 2. I f the t rust 's inc lusion rate was 3/4, the inverse is 4/3. I f the t rust 's inc lusion rate was 2/3, the inverse is 3/2. For 2000 (and 2001, i f appl icable) , use the inc lus ion rate f rom l ine 16 of the 2000 Schedule 1.

Line 40 – Other deduct ions f rom tota l income General ly, you can deduct expenses i f they were paid to earn income for the t rust . Expenses inc lude legal , account ing, and management fees. You can a lso deduct the fees paid for advice or assistance to f i le an object ion or an appeal to an assessment or decis ion under the Act (al though you have to reduce the claim by any award or reimbursement you received for such expenses) .

Do not deduct the fo l lowing:

• out lays and expenses that apply to the capi ta l assets of the t rust (see "Out lays and expenses" on page 184 [36] )

• personal expenses of the benef ic iar ies or t rustees, such as funeral expenses or probate fees

– 144 –

• any amounts paid to benef ic iar ies

Note Enter investment counsel fees paid (paragraph 20(1)(bb)) on l ine 21. For more informat ion, see "L ines 13 to 17 – Carry ing charges and interest expenses" on page 219 [42] .

Line 43 – Upkeep, maintenance, and taxes of a property used or occupied by a benef ic iary

You may have c la imed expenses on the return that re late to the upkeep, maintenance, and taxes on a property used by a benef ic iary. You may have c la imed these expenses on a f inancia l s tatement , such as a renta l s tatement. General ly, i f these amounts were pa id out of the income of the t rust according to the t rust document, the benef ic iary is required to inc lude these amounts in income in the year they were paid. Therefore, you have to report these benef i ts as income on the benef ic iary's T3 s l ip , and you wi l l deduct them again f rom the t rust 's income on l ine 47. To of fset th is "double-deduct ion" of the same expenses, you have to add these amounts back into the t rust 's income on l ine 43.

– 145 –

Provide deta i ls of the amount entered on th is l ine, inc luding the nature and amount of each expense, and where on the return or f inancia l s tatement these expenses have been c la imed.

Line 44 – Value of other benef i ts to a benef ic iary

You may have paid benef i ts , such as amounts for personal or l iv ing expenses, f rom the t rust to a benef ic iary. The benef ic iary has to inc lude the value of these benef i ts in income in the year they were paid, unless the value:

• is a l ready inc luded in ca lculat ing the benef ic iary's income for the year

• has been used to reduce the adjusted cost base of the benef ic iary's in terest in the t rust

Enter on l ine 44, the amount of these benef i ts that were inc luded as income on the benef ic iary's T3 s l ip.

Because you have to deduct the value of the benef i ts as income al locat ions and designat ions to benef ic iar ies on l ine 47, and the t rust cannot deduct th is amount , you have to add i t back into the t rust 's

– 146 –

income by inc luding the amount on l ine 44. Provide deta i ls of the amount entered on th is l ine, inc luding the nature and amount of each benef i t .

▲ L ines 471, 472, and 47 – Total income al locat ions and designat ions to benef ic iar ies

General ly, a t rust receives income and pays i t to the benef ic iar ies according to the terms of a wi l l or t rust document. We cal l th is al locating income (def ined on page 18 [5] ) . In most cases, you enter the income on the T3 return in Step 2, then enter i t on l ine 471 in Step 3, so the t rust does not pay tax on the income. The benef ic iary then has to report the income on h is or her return. For more informat ion, see "Schedule 9 – Income Al locat ions and Designat ions to Benef ic iar ies" on page 224 [43] .

In some cases, income that is a l located to a benef ic iary may be taxed on the t rust 's return, instead of on the benef ic iary's return. In other cases, income that is usual ly reported on the t rust 's return may instead be reported on the benef ic iary's return. For more informat ion, see "Except ions and l imi ts to income al locat ions" on page 235 [44] .

– 147 –

Note Income al located to a benef ic iary that is not deduct ib le by the t rust (other than a designated amount inc luded in l ine 472) should not be inc luded on l ine 471, or reported on Schedule 9.

On l ine 471, enter the amounts paid or payable to benef ic iar ies in the current year, inc luding any amount designated by a preferred benef ic iary e lect ion. On l ine 472, subtract the amounts c la imed under subsect ions 104(13.1) and 104(13.2) . Enter the resul t on l ine 47.

For more informat ion, see " Income to be taxed in the t rust" on page 242 [46] .

Tax t ip Line 47 has to equal the amount entered on l ine 928 of Schedule 9.

Step 4 – Calculating taxable income: Lines 51 to 56 Losses of other years – I f you are c la iming a loss f rom other years, provide a cont inui ty s tatement of the loss balances.

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Be sure the statement inc ludes the year the loss was incurred, the amounts appl ied in prev ious years, and the balance remaining at the beginning of the current year.

I f the t rust is c la iming more than one loss, or i f a c la im needs more explanat ion, at tach a note to the return provid ing the deta i ls .

Loss trading – Rules for trusts

The loss st reaming ru les general ly apply to l imi t a corporat ion 's t rading of cer ta in tax at t r ibutes ( for example, non-capi ta l losses, net capi ta l losses, farm losses, and unused investment tax credi ts) where a person or group of persons acquires cont ro l of the corporat ion. The loss-st reaming and re lated ru les apply, wi th appropr iate modi f icat ions, to a t rust that is subject to a " loss restr ic t ion event . "

A t rust wi l l be subject to a loss restr ic t ion event when a person or par tnership becomes a major i ty- in terest benef ic iary of the t rust or a group becomes a major i ty- in terest group of benef ic iar ies of the t rust . The concepts of major i ty- interest benef ic iary and major i ty- in terest group of benef ic iar ies wi l l apply as they do under the exist ing income tax provis ions for af f i l ia ted persons, wi th appropr iate modi f icat ions.

– 149 –

In general , under the af f i l ia ted persons provis ions, a major i ty- in terest benef ic iary of a t rust is a benef ic iary who, together wi th persons and partnerships wi th which the benef ic iary is af f i l ia ted, has a benef ic ia l in terest in the t rust 's income or capi ta l wi th a fa i r market value that exceeds 50 per cent of the fa i r market value of al l the benef ic ia l in terests in income or capi ta l , respect ive ly, in the t rust . Addi t ional ru les apply to benef ic iar ies who have discret ionary interests.

The ru les that deem certa in t ransact ions or events to involve (or not involve) an acquis i t ion of contro l of a corporat ion are appl icable, wi th appropr iate modi f icat ions, in determining whether a t rust is subject to a loss restr ic t ion event under sect ion 251.2. For example, ru les s imi lar to the cont inui ty of ownership ru les that deem a corporate acquis i t ion of contro l not to occur in cer ta in c i rcumstances involv ing the death of a shareholder , or involv ing t ransact ions wi th in cer ta in groups of shareholders, wi l l a lso apply in the context of t rusts and thei r benef ic iar ies.

Many of the typical t ransact ions or events involv ing changes in the benef ic iar ies of a personal ( that is , fami ly) t rust wi l l not , because of the cont inui ty of ownership ru les, resul t in the t rust being subject to a loss restr ic t ion event .

– 150 –

These measures, apply to transact ions that occur after March 20, 2013.

The acquis i t ion of equi ty in cer ta in types of investment t rusts wi l l not be t reated as a loss restr ic t ion event of the t rusts i f cer ta in condi t ions are met. Certa in re l iev ing measures exist where a t rust is subject to a loss restr ict ion event ; for example, the f i l ing due date of the t rust 's T3 return and issuance of T3 s l ips , and balance due date have been extended in respect of a tax year that is deemed to end before the loss restr ic t ion event .

Line 51 – Non-capi ta l losses of other years A non-capi ta l loss could ar ise i f the t rust had a loss f rom business or property in a year, and i t was more than the t rust 's income f rom al l sources in that year.

The tax year in which the non-capi ta l loss was incurred wi l l a f fect the extent to which you can carry over the unused port ion. You can carry over the unused port ion of a loss that was incurred in a tax year-ending: • on or af ter January 1, 2006, back 3 years and forward 20 years

• af ter March 22, 2004, and before January 1, 2006, back 3 years and forward 10 years

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• before March 23, 2004, back 3 years and forward 7 years

I f the t rust has an unused non-capi ta l loss f rom a previous year , you can use i t to reduce taxable income for the current year. Enter th is amount on l ine 51.

For in format ion on how to carry back an unused non-capi ta l loss, see "Form T3A, Request for Loss Carryback by a Trust" on page 152 [30] .

Farming and f ishing losses – I f the t rust had a farming or f ish ing loss f rom a previous year, see "L ine 54 – Other deduct ions to arr ive at taxable income" on page 155 [30] .

Line 52 – Net capi ta l losses of other years General ly, i f the t rust 's a l lowable capi ta l losses are more than i ts taxable capi ta l gains in a year , the d i f ference is a net capi tal loss for that year . You can use the net capi ta l loss to reduce the t rust 's taxable capi ta l gains in any of the three preceding years or in any future year .

Wi th in cer tain l imi ts , you can deduct a l l or a por t ion of the t rust 's net capi ta l losses of other years that have not a l ready been c la imed.

– 152 –

For more informat ion, see Guide T4037, Capi ta l Gains.

Listed personal property losses – Losses on l is ted personal property (LPP) can be appl ied only against LPP gains. Claim the unused port ion of an LPP loss from a previous year against a current-year LPP gain on l ine 8 of Schedule 1, or on l ine 8 of Form T1055, Summary of Deemed Disposi t ions (2002 and la ter tax years) , i f appl icable. For more informat ion, see "L ines 7 to 9 – L is ted personal property" on page 196 [38] .

The unused port ion of an LPP loss can be carr ied back three years and forward seven years, and appl ied against LPP gains in those years.

For in format ion on how to carry back an unused net capi ta l loss or an LPP loss, see the next sect ion.

Form T3A, Request for Loss Carryback by a Trust Use th is form to carry an unused loss back to a previous year. You have to make your request on or before the due date of the return for the year in which the t rust incurred the loss. You can at tach the completed form to the current year 's return or, where appl icable, f i le i t together wi th the Form T3-ADJ, T3 Adjustment Request .

– 153 –

I f the loss was not deducted fu l ly in a previous year, keep a schedule of the unused por t ion so you can deduct i t in future years. Always apply the o ldest loss wi th in a c lass of losses f i rs t . For example, apply a 2007 non-capi ta l loss before a 2008 non-capi ta l loss.

A non-capi ta l loss carryback is used to reduce the taxable income of the t rust in a previous year. A net capi ta l loss carryback is deduct ib le in comput ing a t rust 's taxable income for a previous tax year only to the extent of the t rust 's taxable capi ta l gains in that previous year.

I f you a l located income or designated taxable capi ta l gains to benef ic iar ies in a previous year and you subsequent ly carry back a loss to that year , the t rust may make a late subsect ion 104(13.1) or (13.2) designat ion only where the appl icat ion of the loss resul ts in n i l taxable income for the t rust .

F i l ings to amend the tax posi t ion of the t rust and the benef ic iary are as fo l lows:

• the t rust would f i le Form T3A, Request for Loss Carryback by a Trust in connect ion wi th the loss year to request the loss be carr ied back to the pr ior year

– 154 –

• the t rust would f i le Form T3-ADJ, T3 Adjustment Request for the pr ior year to ref lect a la te subsect ion 104(13.1) or (13.2) designat ion so as to amend the t rust 's T3 return

• the t rust would issue amended T3 s l ips to the benef ic iary for that pr ior year, reducing the income al located

• the benef ic iar ies would f i le a Form T1-ADJ, T1 Adjustment Request to ref lect the rev ised T3 s l ip and to amend the T1 return

The CRA wi l l only reassess benef ic iar ies ' returns i f the tax years to which they re late and the tax year of the t rust to which the loss wi l l be appl ied are not s tatute-barred.

The t rust must f i le Forms T3A and T3-ADJ together as they must be processed concurrent ly.

I f you apply a net capi ta l loss carryback, a non-capi ta l loss may be increased or created i f the loss was previously used to reduce the amount of taxable capi ta l gains in the year of the carryback.

For more informat ion, see archived Interpretat ion Bul let in IT-232, Losses – Their Deduct ib i l i t y in the Loss Year or in Other Years.

– 155 –

Line 54 – Other deduct ions to arr ive at taxable income

Enter other deduct ions, such as:

• pr ior-year l imi ted par tnership, farming, or f ish ing losses (see Note)

• the $2,000 deduct ion a l lowed to a non-prof i t organizat ion repor t ing income f rom property (subsect ion 149(5) deduct ion)

• the amount of fore ign income repor ted that is exempt f rom tax in Canada because of a tax t reaty or convent ion ( ident i fy the exempt income amount , and the t reaty or convent ion that appl ies)

Note The unused port ion of a farming or f ish ing loss incurred in a year can be carr ied back 3 years. For more informat ion on the deduct ib i l i t y of farming or f ish ing losses, see Chapter 6 – Losses in Guide T4002, Sel f -employed Bus iness, Professional , Commission, Farming, and Fishing Income.

– 156 –

Step 5 – Summary of tax and credits: Lines 81 to 100

▲ L ine 81 – Total federal tax payable

Enter the federal tax payable f rom l ine 33 of Schedule 11, or l ine 54 of Schedule 12.

▲ L ine 82 – Provinc ia l or terr i tor ia l tax payable

For informat ion on which provinc ia l or terr i tor ia l form to use, see "Provinc ia l and terr i tor ia l income tax" on page 312 [59] .

▲ L ine 85 – Tax paid by insta lments

Enter the tota l insta lment payments made by the t rust . I f the account number on the t rust 's receipt is not the same as the one on page 1 [1] of the return, enter the account number f rom the receipt to the r ight of l ine 85. I f you received a refund of a l l or par t of an insta lment , do not inc lude th is amount on l ine 85.

– 157 –

Note Do not include, on l ine 85, any tax wi thheld on income earned by the trust. Any amount of tax withheld, as shown on the trust 's information sl ips, is to be reported on l ine C. See the fol lowing sect ion.

Tax instalments For tax years before 2016, testamentary t rusts were exempted f rom the tax insta lment ru les and therefore were requi red to pay any tax owing wi th in 90 days af ter the end of the tax year. For 2016 and subsequent tax years, only a graduated rate estate is exempt f rom making the tax insta lments. However, consistent wi th current administ rat ive pract ices, the CRA wi l l cont inue to not assess penal t ies or in terest where a t rust fa i ls to make suf f ic ient insta lment payments.

▲ L ines C, D, and 86 – Total tax deducted I f tax was wi thheld on any income earned by the t rust , enter the amount of tax wi thheld on l ine C. At tach informat ion s l ips i f they are avai lable. I f an informat ion s l ip is not avai lable, at tach a statement f rom the issuer, indicat ing the income reported and the tax wi thheld. Do not a l locate the tax that was wi thheld to the benef ic iar ies.

– 158 –

Transfer to Quebec – I f the t rust was resident in Quebec and earned income outs ide that province, tax may have been wi thheld for a province or terr i tory other than Quebec. You can t ransfer up to 45% of th is amount to the province of Quebec. Enter th is amount on l ine D. I f th is does not apply to you, enter "0" on l ine D.

Subtract the t ransferred amount f rom tota l tax deducted, and enter the resul t on l ine 86.

Line 89 – Capi ta l gains refund

This refund is avai lable only to a mutual fund t rust that has refundable capi ta l gains tax on hand at the end of the year. To calculate the refund, complete Form T184, 2018 Capi ta l Gains Refund to a Mutual Fund Trust .

Line 90 – Part XI I .2 tax credi t

I f the t rust is the benef ic iary of another t rust and received a T3 s l ip f rom that t rust wi th an amount in box 38, enter that amount on l ine 90.

– 159 –

Line 91 – Other credi ts

Certa in provinc ia l or terr i tor ia l tax credi ts are avai lable to a t rust i f the t rust meets both of the fo l lowing condi t ions:

• i t was a resident of the province or terr i tory at the end of the tax year

• i t incurred e l ig ib le expendi tures re lated to cer ta in act iv i t ies

You can f ind speci f ic in format ion on the fo l lowing forms:

• Form T1129, Newfoundland and Labrador Research and Development Tax Credi t ( Indiv iduals) ( for the Newfoundland and Labrador research and development tax credi t )

• Form T1232, Yukon Research and Development Tax Credi t ( Indiv iduals) ( for the Yukon research and development tax credi t )

• Form T88, Br i t ish Columbia Mining Explorat ion Tax Credi t ( Indiv iduals) ( for the Br i t ish Columbia mining explorat ion tax credi t )

Use the appropr iate form to calculate the tax credi t . At tach the form to the t rust 's return.

– 160 –

In the case of the research and development tax credi ts , the t rust can designate some or a l l o f these credi ts to benef ic iar ies of the t rust . Subtract the amount designated to benef ic iar ies f rom the credi t ca lculated on the form. Enter the resul t on l ine 91 of the t rust 's return.

▲ L ine 94 – Refund or balance owing

The refund or balance owing is the d i f ference between the tota l taxes payable on l ine 84 and the tota l credi ts on l ine 93. General ly, a d i f ference that is $2 or less does not have to be paid, nor wi l l i t be refunded.

▲ L ine 95 – Amount enclosed

Enter the amount of the payment you are sending the CRA with your tax return. For more information see "Payment opt ions" on page 99 [20].

– 161 –

▲ L ine 100 – Refund code

I f the t rust is ent i t led to a refund, enter one of the fo l lowing codes in the refund code box:

0 i f you want us to refund the credi t

1 i f you want us to keep the credi t for next year

2 i f you want us to hold the credi t and apply i t to an expected assessment of an addi t ional amount to be paid. At tach a le t ter provid ing deta i ls

To have the t rust 's refund deposi ted d i rect ly in to the t rust 's account , complete the "Direct Deposi t – Star t or change" area on page 24 [4] of the T3RET, Trust Income Tax and Informat ion Return.

You also have to send us a void cheque or a le t ter / form stamped by the f inancia l inst i tu t ion showing that the account is in the name of the t rust . You do not have to complete th is area i f you a l ready have d i rect deposi t serv ice and the informat ion you have a l ready g iven us has not changed. Your d i rect deposi t request wi l l s tay in ef fect unt i l you update the informat ion.

– 162 –

We consider the credi t to have been received on the date we assess your return. F i rs t , we wi l l apply a credi t to any outstanding balance. Then, we wi l l d i rect any amount le f t over according to the code you enter . I f you do not enter a code, we wi l l refund the credi t .

Name and address of person or company who prepared this return

Complete th is par t i f someone other than the t rustee, executor , l iqu idator , or administ rator prepared th is return.

▲ Cert i f icat ion

The t rustee, executor , l iquidator , or administ rator of the t rust has to complete and s ign th is par t .

Chapter 3 – Trust schedules and forms Schedule 1 – Dispositions of Capital Property I f the t rust disposed of capi ta l property in the year, see Guide T4037, Capi ta l Gains, for the general ru les regarding capi ta l gains and losses. We expla in the ru les that re late to t rusts in th is sect ion.

– 163 –

Complete Schedule 1 and f i le i t wi th the T3 return i f the t rust had d isposi t ions of capi ta l property dur ing the year. Do not inc lude any deemed disposi t ions that are repor ted on Form T1055, Summary of Deemed Disposi t ions (2002 and later tax years) . For more informat ion, see "Form T1055, Summary of Deemed Disposi t ions (2002 and later tax years)" on page 201 [39] .

Transfer any taxable capi ta l gains f rom l ine 23 of Schedule 1 to l ine 01 of the return.

A d isposi t ion of capi ta l proper ty inc ludes any of the fo l lowing:

• the sale of property • the sale of the pr inc ipal res idence • the d is t r ibut ion or exchange of property • the making of a g i f t • a redempt ion of shares • a debt set t lement • a thef t • the destruct ion of property

– 164 –

Note We do not consider a d isposi t ion to have occurred i f two corporat ions or a parent corporat ion and i ts subsid iary have amalgamated and there is no considerat ion for the redempt ion of shares. For more informat ion, cal l 1-800-959-8281 .

Certain gif ts – zero inclusion rate

General ly, a t rust 's taxable capi ta l gain f rom the d isposi t ion of capi ta l property is 50% of the t rust 's capi ta l gain wi th cer ta in except ions.

I f the t rust donated cer ta in types of capi ta l property to a registered char i ty or other qual i f ied donee, the t rust may not have to inc lude in i ts income any amount of capi tal gain real ized on such gi f ts . The t rust may be ent i t led to an inc lus ion rate of zero on any capi ta l gain real ized on such gi f ts .

Donated capi ta l property, where an inc lus ion rate of zero may apply, inc ludes a l l o f the fo l lowing:

• a share, debt obl igat ion, or r ight l is ted on a designated stock exchange

– 165 –

• a share of the capi ta l s tock of a mutual fund corporat ion

• a uni t of a mutual fund t rust

• an interest in a re lated segregated fund t rust

• a prescr ibed debt obl igat ion

• cer t i f ied ecological ly sensi t ive land inc luding a covenant or an easement to which land is subject or , in the case of land in the Province of Quebec, a personal serv i tude where cer ta in condi t ions are met or a real serv i tude g i f ted to a qual i f ied donee other than a pr ivate foundat ion. For more informat ion see "Gi f ts of ecological ly sensi t ive land" in Pamphlet P113, Gi f ts and Income Tax.

I f there is no advantage in respect of the g i f t , the fu l l amount of the capi ta l gain real ized on the g i f t is e l ig ib le for an inc lus ion rate of zero. However, i f there is an advantage, only par t of the capi ta l gain is e l ig ib le for the inc lus ion rate of zero. The remainder is subject to an inc lus ion rate of 50%.

For deaths that occur after 2015 , a zero inc lus ion rate may also apply to a g i f t of certa in capi ta l property made to a qual i f ied donee by

– 166 –

a GRE (or by a former GRE). The donated property must be proper ty that was acquired by the estate on and as a consequence of the death of the indiv idual (or property that was subst i tu ted for such property) . Where condi t ions are met, the zero inc lus ion rate wi l l apply to any capi ta l gain real ized on the deemed dispos i t ion of the property immediate ly before the indiv idual 's death reported on the indiv idual 's f ina l return as wel l as to any capi ta l gain real ized by the estate on the t ransfer of the property to the qual i f ied donee.

For more informat ion, see T3 Schedule 1A, Capi ta l Gains on Gi f ts of Certa in Capi ta l Proper ty and the sect ion cal led "Capi ta l gains real ized on g i f ts of cer ta in capi ta l property" in Pamphlet P113, Gi f ts and Income Tax.

Distr ibution of property to beneficiaries

I f a personal t rust d is t r ibutes property to a benef ic iary ( to set t le in whole or in par t the benef ic iary's capi ta l in terest in the t rust) , at tach a statement to the return that inc ludes a l l o f the fol lowing informat ion about the d is t r ibuted property:

• the name and address of the rec ip ient or rec ip ients

– 167 –

• a descr ipt ion of the property

• the fa i r market value (FMV) on the day i t is d is t r ibuted

• the cost amount on the day i t is d is t r ibuted

For in format ion regarding the d is t r ibut ion of property to a non-resident benef ic iary, see "Capi ta l d isposi t ions – Rules for t rusts" on page 174 [34] .

Graduated rate estate elect ions ( losses)

For 2016 and subsequent tax years, i f you are a legal representat ive administer ing the graduated rate estate of a deceased person, you may:

• e lect under 164(6) to t reat cer ta in capi ta l losses and terminal losses, ar is ing in the f i rs t tax year o f the deceased person's graduated rate estate, as losses of the deceased person for that person's f inal tax year

• e lect under 164(6.1) to carryback cer ta in amounts re lat ing to employee stock opt ions, ar is ing in the f i rs t tax year of the deceased person's graduated rate estate, to be deducted in comput ing the deceased person's income for that person's f inal tax year

– 168 –

Pr ior to January 1, 2016, these elect ions were avai lable to a l l estates. However, ef fect ive January 1, 2016, these e lect ions are only avai lable to an estate that is a graduated rate estate.

These e lect ions apply only to the f i rs t tax year o f a deceased person's estate. The elect ions do not af fect the return of the deceased person for any year before the year of death.

Due date of elect ion and amended f inal T1 return

In addi t ion to f i l ing the e lect ion you are a lso required to f i le an amended f inal T1 return of the deceased person to g ive ef fect to the ru les. Both the e lect ion and amended f inal T1 return must be f i led by the later of :

• the f i l ing due date of the deceased person's f inal T1 return that the legal representat ive is required to f i le or has e lected to f i le

• the f i l ing due date for the estate 's T3 return for i ts f i rs t tax year

When f i l ing the amended T1 return, you must c lear ly ident i fy the amended f inal T1 return of the deceased person as a "164(6) e lect ion" or a "164(6.1) e lect ion."

– 169 –

164(6) elect ion

General ly, you can make th is e lect ion for :

• a l l or any por t ion of the capi ta l loss ( to the extent the graduated rate estate's capi ta l losses exceed i ts capi ta l gains) resul t ing f rom the d isposi t ion of the graduated rate estate 's capi ta l property as reported on Schedule 1

• a l l or any por t ion of the terminal loss (not exceeding the tota l of the graduated rate estate 's non-capi ta l loss and farm loss before the e lect ion) resul t ing f rom the d isposi t ion of a l l o f the depreciable property of a prescr ibed c lass of the graduated rate estate

I f you are making an e lect ion under 164(6) for the graduated rate estate, at tach the fo l lowing to the T3 return:

• a le t ter indicat ing that you are making an e lect ion under 164(6) and provid ing a l l o f the fo l lowing informat ion:

• the amount of the capi tal loss you elect to be a capi ta l loss of the deceased person

– 170 –

• the amount of the terminal loss you e lect to be deduct ib le in comput ing the income of the deceased person

• a schedule wi th deta i ls of the capi tal loss

• a schedule wi th the deta i ls of the terminal loss and a statement of the amounts that would have been the non-capi ta l loss and the farm loss of the estate for i ts f i rs t tax year had the e lect ion not been made

The graduated rate estate cannot c la im a loss that you have e lected to t ransfer to the deceased person's f inal T1 return. However, you have to report the d isposi t ions of the estate property on Schedule 1. I f the tota l is a loss, enter the amount e lected under subsect ion 164(6) on l ine 19.

Tax t ip I f you know you want to apply a loss to the deceased person's f inal T1 return before that return is due to be f i led, you can submit a request to apply the loss wi th the return. Clear ly ident i fy the return as a 164(6) e lect ion. Al though we wi l l not a l low the c la im on the in i t ia l assessment of the T1 return, we wi l l hold your request unt i l

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we assess the T3 return and ver i fy your c la im. I f we accept your c la im, we wi l l adjust the T1 return, and issue a not ice of reassessment.

164(6.1) elect ion

This e lect ion appl ies to cer ta in unexerc ised employee secur i ty opt ions held by a person, at the t ime of death, in respect of which a benef i t has been inc luded in the person's income under paragraph 7(1)(e) for the tax year in which the person d ied. General ly, where the value of those unexerc ised opt ions subsequent ly dec l ines and the opt ions expired or were exerc ised or d isposed of in the f i rs t year of the estate, the deceased's legal representat ive may elect to t reat an amount determined under 164(6.1) as a loss of the deceased f rom employment for the year in which the person d ied.

You can only make th is e lect ion for employee secur i ty opt ions that exp ired, or that you exerc ised, or d isposed of in the f i rs t tax year of the graduated rate estate.

– 172 –

I f you are making an e lect ion under 164(6.1) for the graduated rate estate, at tach the fo l lowing to the T3 return:

• a le t ter indicat ing that you are making an e lect ion under 164(6.1) and provid ing a l l o f the fo l lowing informat ion:

– the amount of the benef i t inc luded in the deceased person's income for the tax year in which the person died

– the amount , i f any, by which the value of the r ight immediate ly before i t was exerc ised or d isposed of exceeds the amount , i f any, the deceased person paid to acquire the r ight

– the amount of the loss you e lect to be a loss of the deceased taxpayer f rom employment in the year in which the taxpayer d ied

– 173 –

Use the fo l lowing calculat ion to determine the amount that can be carr ied back to the deceased person's f ina l T1 return:

A – (B + C)

where:

A = the deemed benef i t for the opt ion inc luded on the deceased person's f inal return

B = the amount by which the value of the opt ion immediate ly before i t expi red, was exerc ised, or d isposed of , is more than the amount the deceased person paid to acquire i t

C = the amount by which A is more than B, i f a secur i ty opt ion deduct ion for th is opt ion was c la imed on the deceased person's f inal return, mul t ip l ied by 50%

I f you make th is e lect ion, reduce the t rust 's adjusted cost base of the opt ion by A minus B, wi thout consider ing C.

– 174 –

Capital disposit ions – Rules for t rusts

After March 22, 2004, a t rust is considered to be af f i l ia ted wi th i ts major i ty in terest benef ic iary and any person who is af f i l ia ted wi th such a benef ic iary. As a resul t , the ru les that apply to af f i l ia ted persons may apply to a t rust and i ts benef ic iar ies, set t lors, or contr ibutors. For more informat ion, cal l 1-800-959-8281 .

After February 27, 2004, a trust that distr ibutes property to a non-resident benef iciary in sat isfact ion of al l or part of the benef ic iary's capital interest in the trust, is deemed to have disposed of such property for proceeds equal to the property's fair market value (FMV) at that t ime. This rule does not apply to proper ty that meets any of the fo l lowing condi t ions:

• a share of the capi ta l s tock of a non-resident owned investment corporat ion

• real or immovable property s i tuated in Canada, a Canadian resource property or a t imber resource property

• capi ta l property used in, Class 14.1 (e l ig ib le capi ta l property before January 1, 2017) in respect of or property descr ibed in the inventory

– 175 –

o f , a business carr ied on by the taxpayer through a permanent establ ishment in Canada at the part icu lar t ime

• an excluded r ight or in terest of the taxpayer, and the condi t ions in subsect ion 107(2) are met and subsect ion 107(4.1) is not appl icable

A t rust that ceases to be res ident in Canada is deemed to have disposed of a l l property, inc luding cer ta in taxable Canadian property, for proceeds equal to the property 's fa i r market value (FMV) at that t ime, and reacquired the property, at the same value, immediately thereaf ter .

These ru les do not apply to any of the fo l lowing propert ies, among others:

• real property s i tuated in Canada, Canadian resource property, or t imber resource property

• property of a business carr ied on by the t rust through a permanent establ ishment in Canada, inc luding capi ta l property, property inc luded in Class 14.1 (e l ig ib le capi ta l property before January 1, 2017) in respect of or , and property descr ibed in the inventory of the business

– 176 –

• pension or o ther s imi lar r ights or in terests

• payments out of an Agr i Invest Fund 2

The t rust or benef ic iary can defer paying tax resul t ing f rom the deemed disposi t ion by provid ing acceptable secur i ty. To arrange secur i ty, ca l l 1-800-959-8281 .

A t rust that ceases to be res ident in Canada, and that owns property wi th a tota l fa i r market value (FMV) of more than $25,000 at that t ime, has to f i le Form T1161, L is t of Propert ies by an Emigrant of Canada, wi th i ts T3 return for that year , l is t ing each property the t rust owned at that t ime. For the purposes of determining whether Form T1161 is required, property does not inc lude:

• money that is legal tender in Canada and al l deposi ts of such money

• pension or o ther s imi lar r ights or in terests

• any i tem of personal-use proper ty, wi th a FMV of less than $10,000 at the t ime the t rust ceased to be a res ident in Canada

– 177 –

Canadian cultural property

For informat ion on d isposi t ions of Canadian cul tura l property, see "Sel l ing or donat ing cer t i f ied Canadian cul tura l property" in Guide T4037, Capi ta l Gains, archived Interpretat ion Bul let in IT -407, Disposi t ions of Cul tura l Property to Designated Canadian Inst i tut ions, and Pamphlet P113, Gif ts and Income Tax.

Proceeds of disposit ion

This is usual ly the amount that the t rust received or wi l l receive for i ts property. In most cases, i t refers to the sale pr ice of the property. In cer ta in s i tuat ions, the proceeds of d isposi t ion are set by ru les in the Act .

Personal trust – When th is k ind of t rust d is t r ibutes property to a benef ic iary, and there is a resul t ing d isposi t ion of a l l or par t of the benef ic iary's capi ta l in terest in the t rust , we general ly consider the t rust to have received proceeds of d isposi t ion equal to the "cost amount" of the property. The cost amount of a capi ta l property (other than a depreciable property) is i ts adjusted cost base. We def ine "Adjusted cost base" on page 182 [35] .

– 178 –

The cost amount of a depreciable property is calculated as fo l lows:

• i f the property was the only property in the c lass, the cost amount is the undepreciated capi ta l cost (UCC) of the c lass before the d ist r ibut ion

• i f there is more than one property in the c lass, the cost amount of each proper ty is as fo l lows:

Capi ta l cost of the

property ÷

Capi ta l cost of a l l propert ies in the c lass

that have not been previously d isposed of

×

UCC of the c lass =

Cost amount of the

property

Where a personal (or prescr ibed) t rust d is t r ibutes property to a benef ic iary to set t le a l l or par t of the benef ic iary's capi ta l in terest in the t rust , the t rust can e lect under subsect ion 107(2.001) of the Act to not have the t rust 's proceeds of d isposi t ion equal to the cost amount of the property.

– 179 –

A subsect ion 107(2.001) t rust e lect ion is appl icable to d is t r ibut ions made af ter October 1, 1996 when:

• the t rust was res ident in Canada when i t d is t r ibuted the proper ty

• the property is taxable Canadian property

• the property is property of a business carr ied on by the t rust through a permanent establ ishment in Canada. This inc ludes capi ta l property and property descr ibed in the inventory of the business, immediate ly before the t ime of d is t r ibut ion

To e lect under subsect ion 107(2.001) of the Act , the t rust must at tach a le t ter to i ts T3 Trust Income Tax and Informat ion Return for the tax year in which the proper ty was d is t r ibuted.

The let ter should inc lude a l l o f the fo l lowing informat ion:

• a declarat ion to e lect under subsect ion 107(2.001) of the Act

• name of the t rust

• t rust account number

• type of t rust

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• t rust 's tax year-end date

• res idency status of the t rust , ( res ident t rust or non-resident t rust )

• i f appl icable, the date the t rust became a res ident of Canada in the year

• i f appl icable, the date the t rust became a non-resident of Canada in the year

• name, address and s ignature of t rustee making the e lect ion

I f you f i le an e lect ion, we consider the t rust , i f res ident in Canada, to have received proceeds of d ispos i t ion equal to the fa i r market value (FMV) of the property at the t ime of d is t r ibut ion.

Ef fect ive for d is t r ibut ion of property af ter December 20, 2002, a personal (or prescr ibed) t rust is deemed to have d isposed of property for proceeds equal to the property 's fa i r market value at the t ime of the d is t r ibut ion i f both of the fo l lowing condi t ions are met:

• at a part icular t ime before December 21, 2002, there was a qual i fying disposit ion (within the meaning assigned by subsection 107.4(1) of the Act) of the property, or of other property for which the property is

– 181 –

subst i tuted, by a part icular partnership or a part icular corporat ion, as the case may be, to the t rust

• the benef ic iary is nei ther the par t icular par tnership nor the par t icu lar corporat ion

Post-1971 spousal or common-law partner trust – When th is k ind of t rust , whose benef ic iary spouse or common- law partner is s t i l l a l ive, d is t r ibutes property such as capi ta l property, resource property, or land inventory to a person who is not the benef ic iary spouse or common- law partner , we consider the t rust to have received proceeds of d isposi t ion equal to the proper ty 's fa i r market value (FMV).

This a lso appl ies to both of the fo l lowing:

• a joint spousal or common-law partner trust that d is t r ibutes property to a person who is not the set t lor , benef ic iary spouse or common- law partner and the set t lor , benef ic iary spouse or common- law partner is s t i l l a l ive

• an alter ego trust that d is t r ibutes property to a person who is not the set t lor and the set t lor is s t i l l a l ive

– 182 –

Trust other than a personal trust – When this k ind of trust distr ibutes property to a benef ic iary and there is a resul t ing d isposi t ion of a l l or par t of the benef ic iary's capi ta l in terest in the t rust , we consider the t rust to have received proceeds of d isposi t ion equal to the property 's fair market value (FMV).

For more informat ion, see Chapter 2 in Guide T4037, Capi ta l Gains.

Adjusted cost base (ACB)

This is usual ly the cost of the property plus expenses incurred to obtain i t . The adjusted cost base can dif fer from the or iginal cost i f changes have been made to the property between the t ime i t was acquired and the t ime i t was sold. For more information, see Guide T4037, Capital Gains, and archived Interpretat ion Bul let in IT-456, Capital Property – Some Adjustments to Cost Base, and i ts Special Release.

General ly ef fect ive af ter February 27, 2004, the cost of a capi ta l in terest in a t rust that is not held by the taxpayer as capi ta l property is deemed to be equal to the cost amount used for inventory valuat ion purposes less the tota l of a l l returns of capi ta l and non-taxable capi ta l gains payable to the taxpayer in respect of the interest , pr ior to the

– 183 –

d isposi t ion. At any par t icu lar t ime, inventory valuat ion is deemed to be the fa i r market value of the capi ta l in terest p lus the sum of a l l returns of capi ta l and non-taxable capi ta l gains payable before that t ime.

Beneficial interest in a trust – A t rust may receive a T3 s l ip wi th an amount showing in box 42. Use th is amount to determine the ACB of your in terest in that t rust . Reduce the cost of your in terest by the tota l of the posi t ive amounts shown in box 42 of the T3 s l ips received f rom the t rust for a l l tax years af ter 2003. Also reduce i t by a l l amounts (other than amounts received as proceeds of d isposi t ion or as a d is t r ibut ion of income of the t rust) received f rom the t rust before 2004. I f the amount in box 42 is in brackets, i t wi l l resul t in an increase in the ACB. You may want to contact the t rustee of the t rust to determine i f there are any other adjustments required in calculat ing the ACB of your in terest . For more in format ion on how to account for box 42 amounts, see Informat ion Sheet RC4169, Tax Treatment of Mutual Funds for Indiv iduals.

Note I f your ACB is reduced to an amount below zero at any t ime in the tax year, we consider a deemed disposi t ion to have occurred. The

– 184 –

negat ive amount is deemed to be a capi ta l gain. Your ACB is then reset to zero. For more informat ion, see "L ine 3 – Mutual fund uni ts and other shares" on page 189 [36] .

Property acquired before 1972

Before 1972, capi ta l gains were not taxed. I f the t rust so ld property acquired before 1972, you have to use specia l ru les when calculat ing the capi ta l gain or capi ta l loss to remove any capi ta l gains accrued before 1972. These ru les are found on Form T1105, Supplementary Schedule for Disposi t ions of Capi ta l Property Acquired Before 1972. Use Form T1105 to calculate the gain or loss f rom sel l ing property the t rust owned before 1972.

Outlays and expenses

These are amounts incurred to se l l a capi ta l property such as f inder 's fees, commissions, broker 's fees, legal fees, and advert is ing costs. You can deduct out lays and expenses f rom the proceeds of d isposi t ion when calculat ing the capi ta l gain or capi ta l loss.

– 185 –

In the case of depreciab le proper ty sold at a loss, these out lays and expenses reduce the proceeds f rom the sale to be credi ted to the c lass. Do not c la im them as deduct ions f rom the t rust 's income.

Note Out lays and expenses made or incurred in respect of deemed disposi t ions cannot be c la imed.

Lines 1 and 2 – Qual i f ied smal l business corporat ion shares and qual i f ied farm or f ish ing property

Use these sect ions i f you are f i l ing a return for a personal t rust report ing a capi ta l gain or loss f rom the d isposi t ion of qual i f ied smal l business corporat ion shares or qual i f ied farm or f ish ing proper ty. For more informat ion, see Guide T4037, Capi ta l Gains.

Do not report a loss the t rust incurred in d ispos ing of shares of , or debts owing by, a smal l business corporat ion in an arm's length t ransact ion. For in format ion on these types of losses, see "L ine 25 – Al lowable business investment losses (ABIL)" on page 138 [27] .

– 186 –

Capi ta l gains f rom the disposi t ion of qual i f ied smal l business corporat ion shares, or qual i f ied farm or f ish ing property may qual i fy for the capi ta l gains deduct ion where the personal t rust is a l locat ing and designat ing the e l ig ib le capi ta l gains to a benef ic iary. Complete Schedules 3 and 4, and see "How to complete the T3 s l ip" on page 329 [62] .

A share in a smal l business corporat ion is considered to be a quali f ied small business corporation share i f a l l o f the fol lowing condi t ions are met:

• at the t ime of d isposi t ion, i t was a share of the capi ta l s tock of a smal l business corporat ion and was owned by the personal t rust , or a par tnership re lated to the personal t rust

• throughout the 24 months before the d isposi t ion, only the personal t rust , or a person or a par tnership re lated to the personal t rust , owned the share

• throughout that par t of the 24 months immediate ly before the d isposi t ion, whi le the personal t rust or person or par tnership re lated to the personal t rust owned the share, i t was the share of a

– 187 –

Canadian-contro l led pr ivate corporat ion (CCPC), and more than 50% of the fa i r market value of the assets of that corporat ion:

– was used main ly in an act ive business carr ied on pr imar i ly in Canada by the CCPC, or by a re lated corporat ion

– was cer ta in shares or debts of connected corporat ions

– was a combinat ion of the two

For the purpose of a qual i f ied smal l business corporat ion share, a person or a par tnership is re lated to a personal t rust i f i t meets any of the fo l lowing condi t ions:

• the person or par tnership is a benef ic iary of the personal t rust

• the personal t rust is a member of the par tnership;

• the person is a member of a partnership that is a member of another partnership and is deemed to be a member of the second partnership

• when the personal t rust d isposes of the shares, a l l the benef ic iar ies are re lated to the person f rom whom the personal t rust acquired the shares

– 188 –

For more informat ion, see "Qual i f ied smal l business corporat ion shares" in Guide T4037, Capi ta l Gains.

Quali f ied farm or f ishing property o f a personal t rust inc ludes any of the fo l lowing property the personal t rust owns:

• a share of the capi ta l s tock of a fami ly farm or f ish ing corporat ion

• an in terest in a fami ly farm or f ish ing par tnership

• real or immovable property, or a f ish ing vessel , or property inc luded in Class 14.1 used in carry ing on a farming or f ish ing business in Canada by ei ther of the fo l lowing:

– an indiv idual benef ic iary (who is ent i t led to receive d i rect ly f rom the t rust any income or capi ta l of the t rust) , or that benef ic iary's spouse or common- law par tner , ch i ld , or parent

– a fami ly farm or f ish ing corporat ion, or a fami ly farm or f ish ing partnership in which e i ther an indiv idual benef ic iary, or the benef ic iary's spouse or common- law partner , ch i ld , or parent own a share in the corporat ion or an interest in the par tnership

– 189 –

Note In addi t ion, cer ta in condi t ions must be met for property to be considered to have been used in the course of carry ing on a farming or f ish ing business in Canada. For more informat ion, see "Chapter 5 – El ig ib le Capi ta l Expendi tures" and "Chapter 7 – Capi ta l Gains" in Guide T4002, Sel f -employed Business, Professional , Commission, Farming, and Fishing Income.

Line 3 – Mutual fund uni ts and other shares

Use th is sect ion to report a capi ta l gain or loss when the t rust se l ls mutual fund uni ts , shares, or secur i t ies that are not descr ibed in any other sect ion of Schedule 1.

I f you are deemed to have a capi ta l gain as a resul t of a negat ive adjusted cost base (ACB), use th is l ine to report the deemed gain. Complete the f i rs t two columns wi th the number of shares and the name of the fund or corporat ion. Enter the ACB in brackets in column 3 and the capi ta l gain in column 5.

– 190 –

Line 4 – Bonds, debentures, promissory notes, and other s imi lar propert ies Use th is sect ion to report capi ta l gains or losses when the t rust se l ls these types of propert ies. The t rust may receive Form T5008, Statement of Secur i t ies Transact ions, or an account s tatement , showing deta i ls of the sale.

Also use th is sect ion to report capi ta l gains or losses when the t rust sel ls opt ions. For in format ion on d isposing of opt ions to sel l or buy shares, see archived Interpretat ion Bul let in IT-96, Opt ions Granted by Corporat ions to Acquire Shares, Bonds, or Debentures and by Trusts to Acquire Trust Uni ts, and archived Interpretat ion Bul let in IT-479, Transact ions in Secur i t ies, and i ts Specia l Release.

Line 5 – Real estate and depreciable property Use th is sect ion i f the t rust sold real estate or depreciable property.

The t rust cannot have a capi ta l loss on the d isposi t ion of depreciable property. However, i t can have a terminal loss under the capi ta l cost a l lowance ru les. For more informat ion, see "Real estate, deprec iable property and other propert ies" in Guide T4037, Capi ta l Gains.

– 191 –

Line 6 – Personal-use property

Use th is sect ion i f the t rust d isposed of property used pr imar i ly for the personal use or enjoyment of a benef ic iary under the t rust , or any person re lated to the benef ic iary. Personal-use property inc ludes personal res idences, cot tages, automobi les, and other personal and household ef fects.

When you d ispose of personal-use property, use both of the fo l lowing ru les to calculate the capi ta l gain or loss:

• i f the adjusted cost base (ACB) of the property is less than $1,000, the ACB is considered to be $1,000

• i f the proceeds of d isposi t ion of the property are less than $1,000, the proceeds are considered to be $1,000

I f the trust disposed of personal-use property that has an ACB or proceeds of disposit ion of more than $1,000, there may be a capital gain or loss. Report the capital gain on Schedule 1. I f there is a capital loss, you usual ly cannot deduct the loss in the year. For more informat ion, see "Personal-use property" in Guide T4037, Capital Gains.

– 192 –

Calculate the capi ta l gain or loss using the actual ACB and proceeds of d isposi t ion i f the t rust , or a person wi th whom the t rust does not deal at arm's length, meets a l l o f the fo l lowing condi t ions:

• personal-use property, inc luding l is ted personal property (LPP), was acquired af ter February 27, 2000

• c i rcumstances suggest that acquis i t ion of the property re lates to an arrangement, p lan, or scheme promoted by another person or par tnership

• the property wi l l be donated to a qual i f ied donee

Principal residence

I f a personal t rust acquires a pr inc ipal res idence, i t may be exempt f rom tax on the capi ta l gain on the d isposi t ion or deemed disposi t ion of that res idence. To be exempt, the res idence has to qual i fy and be designated by the trust as i ts pr incipal res idence. Before December 31, 2016, a res idence could usual ly be designated i f a speci f ied benef iciary, or that benef iciary's spouse or common-law partner, former spouse or common- law partner , or chi ld , l ived in i t . A speci f ied benef ic iary is one who had a benef ic ia l in terest in the t rust , and who

– 193 –

ord inar i ly l ived, or had a spouse or common- law partner , former spouse or common- law partner , or chi ld , who l ived in the res idence.

Af ter 2016, the types of t rusts that are el ig ib le to designate a property as a pr inc ipal res idence are l imi ted to a t rust that is :

• an a l ter ego t rust , spousal or common- law partner t rust , jo int spousal or common- law partner t rus t , or cer ta in t rusts for the exclus ive benef i t o f the set t lor dur ing the set t lor 's l i fet ime (col lect ive ly referred to as " l i fe- t ime benef i t t rusts") , where the speci f ied benef ic iary of the t rust for each tax year for which the t rust is designat ing the property as i ts pr inc ipal res idence, is the set t lor , spouse or common- law partner or former spouse or common- law partner of the set t lor (as the case may be)

• a qual i f ied d isabi l i t y t rust , so long as, the "e lect ing benef ic iary" of the t rust for the year is :

– res ident in Canada dur ing the year

– the speci f ied benef ic iary of the t rust dur ing the year

– a spouse, common- law partner , former spouse or common- law par tner or chi ld of the set t lor

– 194 –

• a t rust , the speci f ied benef ic iary of which for the year is an indiv idual :

– who has not reached 18 years of age before the end of the year – who is res ident in Canada dur ing the year – one of whose parents is a set t lor of the t rust and e i ther of the

fo l lowing condi t ions is met : – nei ther the mother or father of the indiv idual is a l ive at the

beginning of the year – the t rust arose before the beginning of the year as a resul t of

the death of e i ther the mother or father of the indiv idual

Specia l t ransi t ional ru les apply to make sure a t rust that owned the property before 2017, which no longer qual i f ies to designate the property as i ts pr inc ipal res idence as a resul t of these new requirements, may cont inue to benef i t f rom the pr inc ipal res idence deduct ion for the gains accrued unt i l December 31, 2016, where the t rust meets a l l o f the fo l lowing condi t ions:

• was otherwise e l ig ib le to c la im a pr inc ipal res idence deduct ion for a tax year that begins before 2017

– 195 –

• owned the property, jo in t ly wi th another person or otherwise, at the end of 2016, and owns i t cont inuously f rom January 1, 2017 unt i l the d isposi t ion

• d isposed of the property af ter 2016

A personal t rust can only designate one property as a pr inc ipal res idence. Also, the speci f ied benef ic iary cannot designate any other property as a pr inc ipal res idence. Make the t rust 's designat ion on Form T1079, Designat ion of a Property as a Pr inc ipal Residence by a Personal Trust . You have to f i le th is form wi th the t rust 's T3 return for the year in which the d isposi t ion or deemed disposi t ion occurs.

When a personal t rust 's pr inc ipal res idence is d is t r ibuted to a benef ic iary, the t rust can e lect to have a deemed disposi t ion of the pr inc ipal res idence at i ts fa i r market value (FMV). When you make th is e lect ion on the t rust 's return for the year of d is t r ibut ion, you may be able to c la im the pr inc ipal res idence exempt ion to reduce the gain, i f any, f rom the t rust 's deemed disposi t ion. The benef ic iary wi l l then acquire the property at i ts FMV.

For more informat ion, see Form T1079 and Income Tax Fol io S1-F3-C2, Principal Residence.

– 196 –

Lines 7 to 9 – Listed personal property

Use th is sect ion to report d isposi t ions of l is ted personal property (LPP), inc luding a l l or par t of any in terest in , or any r ight to, a l l o f the fo l lowing propert ies:

• pr ints , etchings, drawings, paint ings, sculptures, or other s imi lar works of ar t

• jewel lery

• rare fo l ios, rare manuscr ipts, and rare books

• s tamps

• co ins

Because an LPP is a type of personal-use property, the capi ta l gain or loss on the sale of the LPP i tem, or set of i tems, is calculated the same way as for personal-use property. For more in format ion, see "L ine 6 – Personal-use property" on page 191 [37] .

– 197 –

Line 10 – Informat ion s l ips

Use th is l ine to report a l l o f the fo l lowing amounts:

• capi ta l gains f rom box 21 of a T3 s l ip • insurance segregated fund net capital losses from box 37 of a T3 sl ip • capi ta l gains d iv idends f rom box 18 of a T5 sl ip • capi ta l gains (or losses) f rom box 34 of a T4PS sl ip • capi ta l gains (or losses) f rom box 30 of a T5013 sl ip

Note I f the T3 s l ip has an amount in box 42, use the amount to calculate the adjusted cost base of the property. Fol low the inst ruct ions on the back of the T3 s l ip . Do th is for every year you own the property. For more informat ion, see Informat ion Sheet RC4169, Tax Treatment of Mutual Funds for Indiv iduals.

I f a s l ip ident i f ies amounts for "qual i f ied smal l business corporat ion shares" or "qual i f ied farm or f ish ing property" in i ts footnote, deta i ls , or other in format ion area, do not repor t these amounts on l ine 10. Enter them on l ine 1 or 2, whichever is appl icable.

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You can v iew your T3, T5, and other tax informat ion s l ips onl ine in My Account at canada.ca/my-cra-account .

Line 12 – Capi ta l losses f rom a reduct ion in business investment loss

Report a capi ta l loss f rom a reduct ion in business investment loss on l ine 12. For more informat ion, see "Reduct ion in business investment loss" on page 139 [27] .

Line 15 – Capi ta l gains ( losses) f rom reserves

I f the t rust sold capi ta l property, but d id not receive the fu l l payment at the t ime of the sale, you can c la im a reserve for the unpaid amount . General ly, the minimum amount of the t rust 's capi ta l gain you have to report each year is 20% of the taxable capi ta l gain. I f you c la imed a reserve in 2017, you have to br ing i t back into the t rust 's income in 2018. I f any of the proceeds are to be paid af ter the end of the year , you may be able to c la im a new reserve. I f you are c la iming a reserve on the t rust 's return, you have to complete Schedule 2. For more informat ion about reserves, see Guide T4037, Capi ta l Gains.

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Line 17 – Capi ta l gains on g i f ts of cer ta in capi ta l property e l ig ib le for the 0% inc lus ion rate Enter on th is l ine the amount f rom l ine 3 of Schedule 1A. On l ine 18, enter the capi ta l gains on g i f ts of capi ta l property inc luded in l ines 1 and 2 of Schedule 1A, excluding amounts reported on l ine 17.

Line 19 – Tota l capi ta l losses t ransferred under subsect ion 164(6) Enter on th is l ine the amount of capi ta l losses you t ransferred under subsect ion 164(6) to the deceased person's f inal T1 return. For more informat ion, see "Graduated rate estate e lect ions ( losses)" on page 167 [33] .

Line 22 – Non-qual i f ied investments for TFSA, RRSP, RRIF, RDSP, and RESP trusts, or d isposi t ion of in terest in a par tnership reported under subsect ion 100(1.1) Use this sect ion i f the tax-free savings account (TFSA) trust, registered ret irement savings plan (RRSP) trust , registered ret irement income funds (RRIF) trust, registered disabi l i ty savings plan (RDSP) t rust, or registered educat ion savings plan (RESP) t rust held non-qual i f ied investments dur ing the tax year.

– 200 –

Use th is sect ion i f , as par t of any t ransact ions or events, the t rust d ispose of an interest in a par tnership and the interest in the par tnership is acquired by a tax-exempt ent i ty, non-res idents , cer ta in persons and cer ta in par tnerships; see subsect ion 100(1) of the Act .

Line 23 – Total taxable capi ta l gains (or net capi ta l losses)

Transfer the tota l taxable capi ta l gains to l ine 01 of the t rust 's return. I f the amount on th is l ine is negat ive, and is not used to reduce your deemed disposi t ions on Form T1055, Summary of Deemed Disposi t ions (2002 and la ter tax years) , you have a net capi ta l loss. Do not enter i t on l ine 01 of the return. For more informat ion, see "Form T3A, Request for Loss Carryback by a Trust" on page 152 [30] .

Note I f the amount on l ine 23 is a capi ta l gain and you calculate a net capi ta l loss on Form T1055, see the inst ruct ions on that form for a possib le adjustment to l ine 23.

– 201 –

Form T1055, Summary of Deemed Disposit ions (2002 and later tax years)

Use Form T1055 to calculate the income, or the capi ta l gain or loss, f rom deemed disposi t ions.

Deemed disposit ion

A trust is deemed to have d isposed of i ts capi ta l property (other than exempt property) , land inventory, and Canadian and fore ign resource propert ies on speci f ied dates cal led deemed disposi t ion days. For more informat ion about the dates, see "Deemed disposi t ion day" on page 205 [39] .

For 2016 and subsequent years, where the pr imary benef ic iary of an a l ter ego t rust , spousal or common- law partner t rust , or the last surv iv ing benef ic iary of a jo in t spousal or common- law partner t rust d ies, there is a deemed year-end of the t rust on the date of death of the benef ic iary. The income that is deemed to be recognized upon the death of the benef ic iary must be reported on the t rust 's T3 return f i led for the deemed year-end of the t rust .

– 202 –

Note Income of the t rust which became payable to the benef ic iary pr ior to thei r death is general ly inc luded in the amounts reported on a T3 s l ip to the benef ic iary and wi l l be inc luded in the benef ic iary 's income in thei r f ina l T1 return.

However, for 2016 and subsequent years, in the case of a testamentary spousal or common-law partner t rust, a jo int elect ion between the trust and the deceased benef iciary's graduated rate estate can be f i led to report the income that is deemed to be recognized upon the death of the benef iciary for the year in the benef iciary's f inal T1 return. This income shal l be reported on the T3 sl ip issued to the benef iciary. For the joint elect ion to be val id al l the fol lowing requirements must be met:

• Immediate ly before death, the benef ic iary was a res ident of Canada.

• The t rust is a testamentary t rust that is a post-1971 spousal or common- law partner t rust and was created by the wi l l o f a taxpayer who d ied before 2017.

• A copy of the jo int e lect ion is f i led wi th both the f inal T1 return of the benef ic iary and the T3 return for the deemed year-end of the

– 203 –

t rust . To make the e lect ion, at tach a le t ter to both the f inal T1 return and the t rust 's T3 return wi th a l l o f the fo l lowing informat ion:

– the T1 and T3 account numbers

– the income amount that was a l located in the T3 s l ip and reported on the f inal T1 return f i led for the deceased benef ic iary

– the s ignatures, names and addresses of both the t rustee(s) of the t rust and the executor(s) for the deceased benef ic iary

The due date for both the t rust return as wel l as any balance payable of the deemed taxat ion year wi l l be 90 days af ter the end of the calendar year in which the deemed year-end fa l ls . For example, should the deemed year-end fa l l on June 3, the return and any balance payable wi l l be due 90 days af ter December 31.

In addi t ion to the propert ies referred to above, i f a post-1971 testamentary spousal or common- law partner t rust holds an Agr i Invest Fund 2 that was t ransferred to i t on the death of the set t lor , report a deemed payment out of the fund on the day the benef ic iary spouse or common- law partner d ies.

– 204 –

I f , a f ter a deemed disposi t ion that was to be reported on Form T1055, the t rust actual ly d isposed of the property in the same tax year , use Schedule 1 to report the gain or loss f rom the actual d isposi t ion. I f the t rust is a post-1971 spousal or common- law partner t rust , a jo int spousal or common- law partner t rust , or an a l ter ego t rust , the gain or loss should instead be reported on Form T1055.

I f a deemed disposi t ion occurs, the t rust is considered to have done both of the fo l lowing:

• d isposed of i ts capi ta l property ( inc luding depreciable property of a prescr ibed c lass) , land inventory, and Canadian and fore ign resource propert ies at the end of the deemed disposi t ion day, at the fa i r market value (FMV)

• reacquired them immediate ly a f ter , at a cost equal to the same FMV

For depreciable property, the t rust has to report both capi tal gains and recapture of capi ta l cost a l lowance.

Use Form T1055 to calculate:

• the adjustments to l ine 23 of Schedule 1

– 205 –

• the amount of tax on which the t rust can e lect to defer payment

• the amount of taxable and deemed taxable capi ta l gains to which you can apply the t rust 's net capi ta l losses of other years

Deemed disposit ion day

This is the day we consider the trust to have disposed of i ts capital property, land inventory, and Canadian and foreign resource propert ies.

General ly, i t is one of the fo l lowing:

• For a spousal or common- law partner t rust , the day the benef ic iary spouse or common- law partner d ied.

• For a jo int spousal or common- law partner t rust , the day the set t lor or the benef ic iary spouse or common- law partner d ied, whichever is la ter .

• For an a l ter ego t rust , the day the set t lor d ied, unless the t rust f i led an e lect ion not to be considered an a l ter ego t rust (see the def in i t ion of a l ter ego t rust in "Chart 1 – Types of Trusts" on page 30 [8] ) . I f the t rust has f i led an e lect ion, the deemed disposi t ion date wi l l be 21 years af ter the day the t rust was created.

– 206 –

• For a t rust to which property was t ransferred by an indiv idual (other than a t rust) where the t ransfer d id not resul t in a change in benef ic ia l ownership of that property and no person (other than the indiv idual) or par tnership has any absolute or cont ingent r ight as a benef ic iary under the t rust , on the day the indiv idual d ies.

• For other t rusts, 21 years af ter the day the t rust was created.

Subsequent deemed disposi t ions wi l l occur every 21 years, on the anniversary of the day establ ished on page 204 [above].

The fol lowing deemed disposit ion days wi l l not result in another deemed disposit ion on the 21st anniversary of that deemed disposit ion day. Instead, the next deemed disposit ion for such trusts wi l l occur 21 years after the day the trust was created or on the anniversary of a deemed disposit ion day otherwise establ ished:

• where a t rust d is t r ibutes proper ty af ter December 17, 1999, to a benef ic iary in respect of the benef ic iary's capi ta l in terest in the t rust and i t is reasonable to consider that the d is t r ibut ion was f inanced by a l iab i l i t y of the t rust , and one of the reasons for incurr ing the l iabi l i t y was to avoid paying taxes because of the death of any indiv idual , the day the property was d is t r ibuted

– 207 –

• where an indiv idual has t ransferred property (other than real property s i tuated in Canada, Canadian resource property, or a t imber resource property, property of a business carr ied on by the t rust through a permanent establ ishment in Canada inc luding capi ta l property, property inc luded in Class 14.1 (e l ig ib le capi ta l property before January 1, 2017) in respect of or , and property descr ibed in the inventory of the business, or cer ta in pension or other s imi lar r ights or in terests) af ter December 17, 1999, to a t rust for the t ransferor 's spouse or common- law partner , and i t is reasonable to conclude that the property was t ransferred knowing that the indiv idual p lanned to emigrate f rom Canada, the day the indiv idual ceases to be res ident in Canada

Exemption from Form T1055 deemed disposit ions

The fo l lowing t rusts are excluded f rom the deemed disposi t ions reported on Form T1055:

• A speci f ied t rust (as descr ibed in "Chart 1 – Types of Trusts" on page 30 [8] ) .

• A uni t t rust .

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• A t rust in which a l l in terests have been permanent ly vested. This except ion appl ies pr imar i ly to those commercia l t rusts (a l l t rusts other than personal t rusts) that do not qual i fy as uni t t rusts. This except ion does not apply to any of the fo l lowing:

– a post 1971 spousal or common- law partner t rust

– a jo int spousal or common- law par tner t rust or an a l ter ego t rust

– a t rust to which property was t ransferred by an indiv idual (other than a t rust) where the t ransfer d id not resul t in a change in benef ic ia l ownership of that property and no person (other than the indiv idual) or par tnership has any absolute or cont ingent r ight as a benef ic iary under the t rust

– a t rust that e lects on i ts return not to apply th is provis ion

– a t rust res ident in Canada that has non-resident benef ic iar ies, i f the fa i r market value (FMV) of the non-resident benef ic iar ies ' in terests in the t rust is more than 20% of the tota l FMV of a l l the interests in the t rust

– a t rust that d is t r ibuted proper ty af ter December 17, 1999, to a benef ic iary in respect of the benef ic iary's capi ta l in terest in the

– 209 –

t rust and i t is reasonable to consider that the d is t r ibut ion was f inanced by a l iab i l i t y of the t rust , and one of the reasons for incurr ing the l iabi l i t y was to avoid paying taxes because of the death of any indiv idual

– a t rust under the terms of which, a l l or par t of any person's in terest is to be terminated wi th reference to a per iod of t ime otherwise than as a consequence of terms of the t rust under which an interest in the t rust is to be terminated as a resul t o f a d is t r ibut ion to the person (or the person's estate) of property of the t rust i f the FMV of the property to be d is t r ibuted is proport ionate wi th the FMV of the person's in terest immediate ly before the d is t r ibut ion.

– 210 –

Summary of Options Avai lable for Deemed Disposit ions Reported on Form T1055

(subject to the provisions of the wil l or trust document)

Options

Post-1971 spousal or

common-law partner trust

Pre-1972 spousal

trust

Gains or losses f rom the deemed disposi t ions taxed in the t rust

Rules apply to spousal and common- law partner (and s imi lar) t rusts – see "Deemed disposi t ion" on page 201 [39] .

yes yes

Elect to defer tax (Form T2223) yes yes

Designate capi ta l gains (box 21 of the T3 s l ip) no yes

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Options

Post-1971 spousal or

common-law partner trust

Pre-1972 spousal

trust

Preferred benef ic iary e lect ion no – for the deemed

disposi t ion occurr ing on the death of

the spouse or common- law

partner

yes – for subsequent d isposi t ions

no – for the date the

spouse died

yes – for subsequent d isposi t ions

– 212 –

Options

Joint spousal or common-law

partner and alter ego trust

Other trusts and spousal or

common-law partner trusts 21 years after f i rst deemed disposit ion

Gains or losses f rom the deemed disposi t ions taxed in the t rust

Rules apply to spousal and common- law partner (and s imi lar) t rusts – see "Deemed disposi t ion" on page 201 [39] .

yes yes

Elect to defer tax (Form T2223) yes yes

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Options

Joint spousal or common-law

partner and alter ego trust

Other trusts and spousal or

common-law partner trusts 21 years after f i rst deemed disposit ion

Designate capi ta l gains (box 21 of the T3 s l ip) no yes

Preferred benef ic iary e lect ion no yes

Form T2223, Election Under Subsection 159(6.1) of the Income Tax Act, by a Trust to Defer Payment of Income Tax

The t rust can e lect to pay i ts income tax ar is ing f rom the deemed disposi t ions reported on Form T1055 in up to 10 annual ins ta lments. Interest at the prescr ibed rate wi l l apply. Use Form T2223 to make th is e lect ion, and send i t to your tax serv ices of f ice no later than the day

– 214 –

the return is due for the tax year the deemed disposi t ion occurs. For more informat ion, cal l 1-800-959-8281 .

Transfer of trust property to another trust

I f one t rust (Trust A) t ransfers capi ta l property, land inventory, or resource property to another t rust (Trust B) , the deemed dispos i t ion day for Trust B becomes the earl iest o f the fo l lowing dates:

• Trust A 's deemed disposi t ion day that would have occurred i f the t ransfer had not been made

• Trust B 's deemed disposi t ion day that would have occurred i f the t ransfer had not been made

• the day of the t ransfer i f the or ig inal t ransfer to Trust A occurred on a ro l lover basis, for example, where Trust A is one of the fo l lowing:

– a spousal or common-law partner trust, and the benef iciary spouse or common-law partner is st i l l al ive at the t ime of the transfer

– a jo int spousal or common- law par tner t rust , and the set t lor or benef ic iary spouse or common- law partner is s t i l l a l ive at the t ime of the t ransfer

– 215 –

– an a l ter ego t rust , and the set t lor is s t i l l a l ive at the t ime of the t ransfer

The last condi t ion wi l l not apply when the t ransfer is between two t rusts of the same type. For example, f rom one al ter ego t rust to another a l ter ego t rust .

▲ Schedule 8 – Investment Income, Carrying Charges, and Gross-up Amount of Dividends Retained by the Trust

Lines 1 to 3 – Div idends f rom taxable Canadian corporat ions

Attach a statement l ist ing the actual amount of dividends the trust received from taxable Canadian corporat ions. In this statement, include actual and deemed taxable div idends. Do not include non-taxable dividends (see "Lines 7 to 12 – Other investment income" on page 216 [ this page] ) , or capital gains dividends that you report on l ine 10 of Schedule 1. We consider dividends credited to the trust 's account by a f inancial inst i tut ion to have been received by the t rust , even i f the t rust d id not receive a T3 or T5 s l ip .

– 216 –

The gross-up amount of taxable d iv idends received f rom taxable Canadian corporat ions qual i f ies for the d iv idend tax credi t . This may reduce the t rust 's tax payable. I f the t rust designated the taxable d iv idends to benef ic iar ies, the tax payable by the benef ic iar ies may be reduced.

The type of d iv idends the t rust receives determines which d iv idend tax credi t rate i t wi l l apply to the gross-up amount of the d iv idends. For eligible dividends received f rom qual i fy ing taxable Canadian corporat ions, the rate is 15.0198% . For dividends other than el igible dividends the rate is 10.0313% .

Box 23 on a T3 s l ip and box 10 on a T5 s l ip show the actual amount of d iv idends other than el ig ib le d iv idends. Enter these amounts on l ine 1 of Schedule 8. Box 49 on a T3 s l ip and box 24 on a T5 s l ip show the actual amount of e l ig ib le d iv idends. Enter these amounts on l ine 2 of Schedule 8.

Lines 4 to 6 – Foreign investment income

Report investment income f rom fore ign sources in Canadian dol lars . Calculate how much to report by mul t ip ly ing the fore ign income by the

– 217 –

exchange rate in ef fect on the day that the t rust received the income. I f the amount was paid at var ious t imes throughout the year , to get the appl icable rate, go to bankofcanada.ca/rates/exchange , or cal l 1-800-959-8281 . Report the fu l l amount of the fore ign income. Do not reduce i t by the tax wi thheld by fore ign author i t ies.

Lines 7 to 12 – Other investment income Report bond interest , bank interest , mortgage interest , and other d iv idends ( inc luding d iv idends under a d iv idend renta l arrangement) . We consider in terest and d iv idends credi ted to the t rust 's account by a f inancia l inst i tu t ion to have been received by the t rust .

Report in terest on tax refunds received in the year on l ine 11.

Do not inc lude the fo l lowing:

• d iv idends the t rust received f rom taxable Canadian corporat ions reported on l ines 1 and 2

• capi ta l gains d iv idends repor ted on l ine 10 of Schedule 1 • non-taxable d iv idends (see "Non-taxable d iv idends received by a

t rust" on page 217 [on th is page] )

– 218 –

For more informat ion on the method of report ing interest and other investment income, see the General Income Tax and Benef i t Guide, and archived Interpretat ion Bul le t in IT-396, Interest Income.

Non-taxable dividends received by a trust

I f the t rust received a non-taxable d iv idend, do not inc lude i t in the t rust 's income. An example of a non-taxable d iv idend is a tax- f ree d iv idend that a Canadian pr ivate corporat ion pays f rom i ts capi ta l d iv idend account .

Certa in non- taxable d iv idends that the t rust received, other than d iv idends paid out of the capi ta l d iv idend account , may reduce the adjusted cost base of the shares on which the d iv idends were paid. Make th is adjustment when calculat ing a capi ta l gain or loss i f the t rust la ter d isposes of the shares.

I f the t rust pays out non- taxable d iv idends to i ts benef ic iar ies, in form the benef ic iar ies that they should not inc lude these div idends in income. You also have to f i le a statement wi th the return contain ing a l l o f the fo l lowing informat ion:

• the name of the payer corporat ion

– 219 –

• the names of the benef ic iar ies, and the amount of non-taxable d iv idends that each benef ic iary received

Lines 13 to 17 – Carrying charges and interest expenses

Carrying charges and in terest expenses inc lude:

• in terest on money borrowed to earn investment income • fees for the management or safe custody of investments • account ing fees for recording investment income • investment counsel fees

Note A deduct ion of an amount paid or payable in respect of the use of a safety deposi t box of a f inancia l ins t i tu t ion is not a l lowed.

Do not inc lude t rustee fees paid by the t rust or brokerage fees or commissions paid by the t rust to buy or sel l secur i t ies. I f the t rust paid these expenses to purchase a secur i ty, they are par t of i ts cost . I f the t rust paid them to sel l a secur i ty, c la im them as "Out lays and expenses ( f rom disposi t ions)" in column 4 of Schedule 1.

– 220 –

You can deduct in terest expenses on a l i fe insurance pol icy loan i f the t rust used the proceeds of the loan to earn income. I f the t rust e lects to add the interest expense to the adjusted cost base of the pol icy, you cannot deduct i t on l ine 21 of the return. I f the t rust is c la iming interest paid on a pol icy loan dur ing the year, the insurer has to complete Form T2210, Ver i f icat ion of Pol icy Loan Interest by the Insurer , no later than 90 days af ter the t rust 's tax year-end.

Lines 18 to 32 – Calculat ing the gross-up amount of d iv idends reta ined or not des ignated by the t rust Use th is sect ion to calculate the gross-up amount of actual d iv idends f rom taxable Canadian corporat ions inc luded on l ines 1 and 2 that the t rust reta ined.

The gross-up rate for eligible dividends received in the year is 38% o f the d iv idends received. This calculat ion is done on l ines 18 to 24.

The gross-up rate for dividends other than el igible dividends received in 2018 is 16% . This calculat ion is done on l ines 25 to 31.

The gross-up does not apply to taxable Canadian div idends received by the t rust i f they are a l located to a non-resident benef ic iary.

– 221 –

I f you have a l located d iv idends by inc luding them in the amount on l ine 926 of Schedule 9, the d iv idends are not designated. Do not inc lude them on l ine 19 or l ine 26.

Cla im the carrying charges that re late to d iv idends on l ine 16 of Schedule 8.

Line 19 – El ig ib le d iv idends des ignated to benef ic iar ies

Enter the amount of net e l ig ib le d iv idends, af ter re lated expenses, that you des ignated to benef ic iar ies f rom l ine 949 of Schedule 9.

Line 21 – El ig ib le d iv idends a l located, but not designated, to non-resident benef ic iar ies

Enter the amount of net e l ig ib le d iv idends, af ter re lated expenses, inc luded in Column 2, l ine 926 of Schedule 9. I f the d iv idends have been al located to non-resident benef ic iar ies on l ine 949, do not inc lude them on l ine 21.

– 222 –

Line 24 – Gross-up amount of e l ig ib le d iv idends reta ined or not designated by the t rust

Mult ip ly the amount on l ine 22 by 38% to calculate the amount to enter on l ine 24. You have to apply the gross-up rate to actual e l ig ib le d iv idends that have been reta ined in the t rust , other than those a l located but not designated to non-resident benef ic iar ies, before you deduct the re lated expenses.

Enter th is amount in the calculat ion area for l ine 13 of Schedule 11.

Line 26 – Div idends other than e l ig ib le d iv idends designated to benef ic iar ies

Enter the amount of net dividends other than el igible dividends , a f ter re lated expenses, that you designated to benef ic iar ies f rom l ine 923 of Schedule 9.

– 223 –

Line 28 – Div idends other than e l ig ib le d iv idends a l located, but not designated, to non-resident benef ic iar ies

Enter the amount of net div idends other than el igible dividends, after related expenses, included in Column 2, l ine 926, Part A of Schedule 9. I f the dividends have been al located to non-resident benef iciar ies on l ine 923, do not include them on l ine 28.

Line 31 – Gross-up amount of d iv idends other than e l ig ib le reta ined or not designated by the t rust

Mult ip ly the amount on l ine 29 by 16% for d iv idends other than e l ig ib le d iv idends, and enter the resul t on l ine 31. You have to apply the gross-up rate to actual div idends other than e l ig ib le d iv idends that have been reta ined in the t rust , other than those a l located but not designated to non-resident benef ic iar ies, before you deduct the re lated expenses.

For d iv idends paid in 2018 , the gross-up rate for dividends other than el igible dividends is 16% .

Enter th is amount in the calculat ion area for l ine 14 of Schedule 11.

– 224 –

Line 32 – Total gross-up amount of d iv idends other than e l ig ib le reta ined or not des ignated by the t rust

Add the gross-up amount of both the el igible dividends and the dividends other than el igible dividends f rom l ines 24 and 31.

Enter the resul t on l ine 49 of the return and on l ine 18 of Schedule 12, i f appl icable.

For more informat ion, see archived Interpretat ion Bul let in IT-524, Trusts – F low-Through of Taxable Div idends to a Benef ic iary – Af ter 1987.

▲ Schedule 9 – Income Al locat ions and Designat ions to Benefic iar ies

Complete th is schedule i f the t rust is a l locat ing income to i ts benef ic iar ies. You also have to complete T3 sl ips and a T3 Summary i f you are a l locat ing income to res ident benef ic iar ies, and NR4 sl ips and an NR4 Summary i f you are a l locat ing income to non-resident benef ic iar ies.

– 225 –

▲ Al locat ions and designations

General ly, you al locate income to the t rust 's benef ic iar ies according to the terms of the wi l l or t rust document. Depending on the type of income al located, you may then designate a l l or par t of the a l located amount . When you designate an amount to a benef ic iary, the type of income keeps i ts ident i ty. This may a l low the benef ic iary to take advantage of a deduct ion or credi t that appl ies to that income (such as the capi ta l gains deduct ion or the d iv idend tax credi t ) .

We def ine "Al locate, a l locat ion" on page 18 [5] and "Designate, designat ion" on page 23 [6] .

You can choose to des ignate the fo l lowing income amounts to a benef ic iary:

• net taxable capi ta l gains

• cer ta in lump-sum pension income

• d iv idends f rom taxable Canadian corporat ions

• fore ign business income

– 226 –

• fore ign non-business income

• pension income that qual i f ies for the pension income amount

• pension income that qual i f ies for acquir ing an e l ig ib le annui ty for a minor benef ic iary

• ret i r ing a l lowances that qual i fy for a t ransfer to a regis tered pension p lan (RPP) or a registered ret i rement savings p lan (RRSP)

Note An insurance segregated fund t rust has to designate a l l o f i ts capi ta l gains and losses to i ts benef ic iar ies.

Use Part B of Schedule 9 to repor t designated amounts. This inc ludes amounts such as fore ign income tax paid, a ret i r ing a l lowance qual i fy ing for t ransfer to an RPP and an RRSP, a Part XI I .2 tax credi t , and other tax credi ts that f low through to the benef ic iary.

Income al located to a benef ic iary that is not deduct ib le should not be reported on Schedule 9.

– 227 –

For more informat ion, see the fo l lowing archived interpretat ion bul le t ins:

• IT-342, Trusts – Income Payable to Benef ic iar ies

• IT-381, Trusts – Capi ta l Gains and Losses and the F low-Through of Taxable Capi ta l Gains to Benef ic iar ies

• IT-524, Trusts – Flow-Through of Taxable Div idends to a Beneficiary – After 1987

Spli t Income

Tax on spl i t income of a minor beneficiary

I f a t rust (other than a communal organizat ion or a mutual fund t rust as descr ibed in Chart 1 – Types of Trusts) a l locates cer ta in types of income to a benef ic iary dur ing the benef ic iary's tax year and the benef ic iary had not at tained the age of 17 before the tax year, the benef ic iary may have to pay a specia l tax ( the tax on spl i t income).

– 228 –

The tax on spl i t income appl ies to a l l o f the fo l lowing:

• taxable div idends al located by the trust (other than dividends from shares of a class l isted on a designated stock exchange and those of a mutual fund corporat ion)

• shareholder benef i ts a l located by the t rust (other than f rom ownership of shares of a c lass l is ted on a designated stock exchange)

• for taxat ion years before 2018, income al located by the t rust that came f rom provid ing serv ices or property to, or in support of , a business operated by:

– a person who is related to the beneficiary at any t ime in the year

– a corporat ion that has a speci f ied shareholder who is re lated to the benef ic iary at any t ime in the year

– a professional corporat ion that has a shareholder who is re lated to the benef ic iary at any t ime in the year

• for 2018 and later years, income al located by the t rust that is der ived d i rect ly or indi rect ly f rom one or more re lated businesses

– 229 –

• income al located by the t rust f rom the renta l of property by a par tnership or t rust , i f a person who is re lated to the benef ic iary at any t ime in the year is act ive ly engaged on a regular basis in the act iv i ty of the par tnership or t rust of earning that income

• for 2018 and later years, a taxable capital gain, or a prof i t , al located by the trust from the disposit ion of property the income of which would be "spl i t income" of the benef iciary i f they received i t direct ly

• deemed div idends that resul t f rom capi ta l gains of a t rust f rom the d isposi t ion of shares (other than shares of a c lass l is ted on a designated stock exchange or those of a mutual fund corporat ion) that are t ransferred to a person who is not at arm's length wi th the benef ic iary.

The tax on spl i t income does not apply i f :

• the income is f rom property the benef ic iary inher i ts f rom ei ther :

• a parent ;

– 230 –

• any other indiv idual, i f the benef iciary is either enrol led as a ful l t ime student during the year, in a post-secondary educational inst i tut ion or qual i f ies for the disabi l i ty tax credit for the year.

• the benef ic iary was a non-resident of Canada at the end of the year, or in case of a deceased benef ic iary, was a non-resident of Canada immediate ly before death

• nei ther of the benef ic iary's parents l ived in Canada at any t ime in the year

For the 2018 and later tax year , the tax on spl i t income wi l l a lso not apply in respect of taxable capi ta l gains f rom the d isposi t ion of qual i f ied farm or f ish ing property or qual i f ied smal l business corporat ion shares. This does not inc lude taxable capi ta l gains f rom the d isposi t ion of cer ta in shares to a person that does not deal at arm's length wi th the benef ic iary.

Tax on spl i t income for an adult beneficiary

For 2018 tax and later years, the tax on spl i t income wi l l a lso apply to indiv iduals over the age of 17, but only wi th respect to cer ta in income der ived f rom a re lated business.

– 231 –

For more informat ion on the appl icat ion of the tax on spl i t income to adults, including information on amounts that are excluded from an adult 's spl i t income for a tax year, and guidance on how the CRA wi l l administer those exclusions, go to canada.ca/en/revenue-agency/ programs/about-canada-revenue-agency-cra/federal-government-budgets/ income-sprinkl ing .

How to report spl i t income

I f the t rust is a l locat ing "spl i t income" to a benef ic iary, you have to in form the benef ic iary that he or she may have to pay the specia l tax. Fol low the inst ruct ions for complet ing Schedule 9 on page 224 [43] and the T3 s l ip on page 329 [62] . At tach a statement to the T3 s l ip showing the type and amount of the benef ic iary's share of the spl i t income. Advise the benef ic iary in wr i t ing that he or she must complete Form T1206, Tax on Spl i t Income.

Note The at t r ibut ion ru les d iscussed in the next sect ion "Transfers and loans of property" do not apply to property that is subject to spl i t income ru les.

– 232 –

Transfers and loans of property

Specia l ru les may apply to amounts f rom a property that , under cer ta in condi t ions, is held by the t rust or is t ransferred or loaned to the t rust . We refer to a person who has loaned or t ransferred property as the " t ransferor . "

A t ransferor , who is a l ive and resident in Canada, may lend or t ransfer property to the t rust for the benef i t o f :

• the t ransferor 's spouse or common- law partner , or a person who has s ince become the t ransferor 's spouse or common- law partner

• the t ransferor 's related minor (such as a chi ld , grandchi ld, s is ter , brother , n iece, or nephew under 18 years of age at the end of the year)

In e i ther case, any income or loss f rom that property may have to be reported on the t ransferor 's return.

Note The t ransferor does not have to report the income of the t rust i f the re lated minor turns 18 years of age before the end of the year.

– 233 –

The t ransferor may a lso have to report taxable capi ta l gains or a l lowable capi ta l losses f rom the d isposi t ion of property loaned or t ransferred to a t rust for the benef i t o f the t ransferor 's spouse or common- law partner , or a person who has s ince become the t ransferor 's spouse or common- law partner .

The property may have been sold to the t rust at i ts fa i r market value, or loaned to the t rust at a prescr ibed rate of in terest , which was paid wi th in 30 days of the tax year-end. I f th is is the case, any income or loss, or any taxable capi ta l gain or a l lowable capi ta l loss, f rom that property is general ly income of the t rust . For th is income, issue the T3 s l ip to the benef ic iary, not to the t ransferor.

An indiv idual can receive a low- interest or interest-free loan from a trust to which another individual transfers property. I f the two indiv iduals do not deal at arm's length, you wi l l normal ly be required to report the income from that loaned property or any property subst i tuted for i t on the trust 's return. This is not the case i f the income is attr ibutable to another individual. This also appl ies to an arm's length commercial loan that the individual uses to repay the original low- interest or interest-free loan.

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I f the t rust 's terms are such that the t ransferred property may rever t to the t ransferor , or i f the t ransferor keeps a cer ta in degree of contro l over the property, see "Except ions and l imi ts to income al locat ions" on page 234 [on th is page] .

I f the income f rom loaned or t ransferred proper ty is to be inc luded on the t ransferor 's return, you general ly have to report i t on the t rust 's return. Issue a T3 s l ip report ing the income as that of the t ransferor .

For more informat ion about t ransfers and loans of property, see Guide T4037, Capi ta l Gains, and the fo l lowing archived interpretat ion bul le t ins:

IT-286 Trusts – Amount Payable

IT-369 At t r ibut ion of Trust Income to Set t lor , and i ts Specia l Release

IT-510 Transfers and Loans of Property Made Af ter May 22, 1985 to a Related Minor

IT-511 Interspousal and Certain Other Transfers and Loans of Property

– 235 –

Exceptions and l imits to income al locations

General ly, t rust income is a l located to benef ic iar ies, or taxed in the t rust , according to the provis ions of the wi l l or t rust document , wi th the fo l lowing except ions and l imi ts :

• A post-1971 spousal or common- law partner t rust (other than one created before December 21, 1991), jo int spousal or common- law partner t rust , or a l ter ego t rust cannot deduct amounts payable in a tax year to anyone except one of the fo l lowing:

– for a t rust that was a post-1971 spousal or common- law par tner t rust on December 20, 1991, or a spousal or common- law partner t rust created af ter December 20, 1991, the benef ic iary spouse or common- law partner , whi le the benef ic iary spouse or common- law partner is a l ive

– for a jo int spousal or common- law partner t rust , the set t lor or the benef ic iary spouse or common- law partner whi le e i ther one of them is a l ive

– for an a l ter ego t rust , the set t lor whi le the set t lor is a l ive

– 236 –

• A post-1971 spousal or common- law partner t rust , jo int spousal or common- law partner t rust , or a l ter ego t rust cannot deduct the a l locat ion of any income real ized f rom deemed disposi t ions of capi ta l property, land inventory of the t rust 's business, and Canadian and fore ign resource property that arose on the death of one of the fo l lowing:

– for a post-1971 spousal or common- law partner t rust , the benef ic iary spouse or common- law partner

– for a jo int spousal or common- law partner t rust , the set t lor or the benef ic iary spouse or common- law partner , whichever is la ter

– for an a l ter ego t rust , or a t rust to which property was t ransferred by an ind iv idual (other than a t rust) where the t ransfer d id not resul t in a change in benef ic ia l ownership of that property and no person (other than the indiv idual) has any absolute or cont ingent r ight as a benef ic iary under the t rust , the day on which the death of the indiv idual occurs

– for the deemed payment from an Agri Invest Fund 2, the beneficiary spouse or common-law partner

– 237 –

• The t rust cannot deduct income f rom payments out of an Agr i Invest Fund 2 unless one of the fo l lowing condi t ions are met:

– the t rust is a testamentary spousal or common- law partner t rust and th is income was received whi le the benef ic iary spouse or common- law partner was a l ive

– the t rust is a communal organizat ion

• Under subsect ion 75(2) of the Act , cer ta in in ter v ivos t rusts res ident in Canada and which were created af ter 1934 may have property (or property subst i tu ted for i t ) that :

– may rever t to the contr ibutor

– may be d is t r ibuted to benef ic iar ies determined by the contr ibutor at a t ime af ter the t rust was created

– may only be d isposed of wi th the consent of , or at the d i rect ion of , the contr ibutor whi le the contr ibutor is a l ive or exis ts

Certa in re lated amounts, inc luding taxable capi ta l gains and al lowable capi ta l losses f rom that property or the subst i tu ted property, are considered to belong to the contr ibutor dur ing the

– 238 –

contr ibutor 's l i fe or existence whi le a resident of Canada. The trust must st i l l report the amount on the trust 's T3 return and issue a T3 sl ip report ing the amount as that of the contr ibutor of the property. For more information, see archived Interpretat ion Bul let in IT-369, Attr ibut ion of Trust Income to Sett lor, and i ts Special Release.

The at t r ibut ion ru les in subsect ion 75(2) apply only in respect of property held by a t rust that is factual ly res ident in Canada. However, s imi lar provis ions exist in sect ion 94 to apply to t rusts that are deemed resident . Contact the Winnipeg Tax Centre at one of the numbers l is ted at page 93 [19] for more informat ion on how these ru les apply.

• A t rust cannot a l locate capi ta l losses and non-capi ta l losses to benef ic iar ies of a t rust except :

– capi ta l losses, i f i t is an insurance-re lated segregated fund t rust

– losses of revocable t rusts and f rom bl ind t rusts. Report these losses in brackets in the appropr iate box on a separate T3 s l ip for the benef ic iary. Clear ly indicate the type of loss in the footnote area below box 26 on the T3 s l ip

– 239 –

• We consider income that was not paid or payable to a benef ic iary to be a l located (as def ined on page 18 [5] ) to a benef ic iary i f he or she has a vested r ight to i ts income, and:

– the t rust is res ident in Canada throughout the year

– the benef ic iary is under 21 years of age at the end of the year

– the benef ic iary's r ight to income is vested by the end of the year , i t d id not become vested due to the exerc ise or non-exerc ise of a d iscret ionary power by any person, and i t is not subject to any future condi t ion other than the condi t ion that the benef ic iary surv ive to an age of not more than 40 years

• The amount of income that can be a l located to a benef ic iary may be l imi ted i f :

– a benef ic iary's share of the income of the t rust is less than his or her capi ta l in terest in the t rust

– the benef ic iary is a designated benef ic iary as descr ibed on page 274 [52] and the t rust was not res ident in Canada throughout the tax year

– 240 –

• When a trust resident in Canada distr ibutes property to a beneficiary and the trust real izes a capital gain, the trust can elect to treat the income as taxable in the trust. That is, the taxable capital gain wi l l not be considered payable to the beneficiary i f the trust:

– was res ident in Canada when i t d is t r ibuted the property

– f i led an e lect ion wi th i ts T3 return for the year, or a preceding tax year, in which the property was d is t r ibuted

The elect ion can be made for d is t r ibut ions to a l l benef ic iar ies or only for d is t r ibut ions to non-resident benef ic iar ies. The t rust may have f i led such an e lect ion in the current year or any preceding year . I f th is is the case, calculate the t rust 's income avai lable for al locat ion to a benef ic iary wi thout tak ing in to considerat ion any gains real ized on the d is t r ibut ion of property to benef ic iar ies covered by the e lect ion whi le the t rust was res ident in Canada.

• A deemed resident trust is l imited in the amounts that i t can al locate to non-resident benef iciar ies. For more information, contact the Winnipeg Tax Centre at one of the numbers l isted on page 93 [19].

– 241 –

• For tax years that end af ter March 4, 2010, a resident contr ibutor to a deemed resident trust may elect to include in comput ing their income, a port ion of the income earned by the trust. General ly, this port ion is equal to the amount of the resident contr ibutor 's contr ibut ion to the trust as a percentage of al l contr ibut ions made by al l resident and connected contr ibutors. The amount included in the elect ing contr ibutor 's income wi l l be deemed to be income from property from a source in Canada, unless the amount is designated by the trust under paragraph 94(16)(c).

A val id elect ion must be f i led in wr i t ing, on or before the contr ibutor 's f i l ing due date for the f i rst tax year for which the elect ion is to take effect. A val id elect ion must also include the trust 's Canadian tax account number, and proof that the contr ibutor has not i f ied the trust of the contr ibutor 's intent ion to become an elect ing contr ibutor no later than 30-days after the trust 's tax year that ends in the ini t ia l year. This is an i rrevocable elect ion. Once a resident contr ibutor has chosen to become an elect ing contr ibutor, they wi l l cont inue to be an e lect ing contr ibutor for a l l subsequent tax years.

– 242 –

The trust may deduct, f rom i ts income for the tax year, an amount equal to the amount included in calculat ing the elect ing contr ibutor 's income as a result of this elect ion. The trust must st i l l report the amount on the trust 's T3 return and issue a T3 sl ip report ing the amount as that of the elect ing contr ibutor of the property. For more informat ion, contact the Winnipeg Tax Centre at one of the numbers l is ted on page 93 [19] .

▲ Income to be taxed in the trust

You can choose to report income on the t rust return, rather than report i t in the hands of the benef ic iar ies, as long as the t rust is :

• res ident in Canada throughout the year

• not exempt f rom tax

• not a speci f ied t rust (as def ined in "Chart 1 – Types of Trusts" on page 30 [8] )

This appl ies to income paid or payable to benef ic iar ies.

– 243 –

You make this choice by indicat ing on l ine 472 of the return for the year that you are making a designation under subsection 104(13.1) . Once you make th is choice, you cannot deduct on l ine 47 the income designated in the e lect ion. An example of when you might use th is designat ion is in a year when a t rust has taxable income and a non-capi ta l loss carryforward.

Once you make the choice, you have to make i t for each benef ic iary. I t reduces a benef ic iary's income f rom the t rust by that benef ic iary's proport ionate share of the income reported on the t rust 's return. We show you how to calcula te the proport ionate share in the fo l lowing sect ion.

You can make a s imi lar designation under subsection 104(13.2) i f taxable capi ta l gains are inc luded in the income reported on the t rust 's return. This wi l l reduce the benef ic iary's taxable capi ta l gains f rom the t rust by that benef ic iary's proport ionate share of taxable capi ta l gains reported on the t rust 's return.

An example of when you might want to make the subsect ion 104(13.2) designat ion is when you are able to use the t rust 's non-capi ta l loss or

– 244 –

net capi ta l loss carryforward to absorb the current-year taxable capi ta l gain.

General ly, amounts designated under subsect ions 104(13.1) and 104(13.2) wi l l reduce the adjusted cost base of a benef ic iary's capi ta l in terest in the t rust unless the interest was acquired for no considerat ion and the t rust is a personal t rust .

I f you choose to designate any por t ion of the benef ic iary's income to be reported on the t rust return:

• enter the amount on l ine 472 of the return

• attach a statement to the return showing the income you are designating and the amounts you are designat ing for each benef iciary

Designat ions under subsect ions 104(13.1) and (13.2) to reta in and tax income or capi ta l gains in the t rust are restr ic ted af ter 2015 as a resul t of subsect ion 104(13.3) . Subsect ion 104(13.3) ensures that these designat ions are made only to the extent that the t rust has a n i l taxable income for the year in which the designat ion is made.

– 245 –

Proportionate share formulas

Use the fo l lowing formulas to calculate designat ions under subsect ions 104(13.1) and 104(13.2) . You have to apply these formulas to each benef ic iary. A t rust cannot use these designat ions to tax one benef ic iary's share in the t rust and a l locate another share to a benef ic iary unless the t rust agreement ent i t les one benef ic iary to the t rust 's income and another benef ic iary to the t rust 's capi ta l .

Subsection 104(13.1)

A ÷ B × C

where:

A = benef ic iary's share of t rust income (calculated wi thout reference to the Act)

B = tota l of amount A for a l l benef ic iar ies

C = t rust income designated under subsect ion 104(13.1)

– 246 –

Subsection 104(13.2)

A ÷ B × C

where:

A = benef ic iary's share of the taxable capi ta l gains of the t rust calculated under the Act

B = tota l of amount A for a l l benef ic iar ies

C = net taxable capi ta l gains designated under subsect ion 104(13.2)

Example A trust 's income is $9,000: investment income of $6,000 and taxable capi ta l gains of $3,000. Both are shared equal ly between the t rust 's two benef ic iar ies, Josh and Ashley. The t rust has $6,000 in losses from pr ior years to apply: a non-capital loss of $5,000 and a net capital loss of $1,000. Therefore, the trustee decides to report $6,000 of income on the t rust return by des ignat ing $5,000 under

– 247 –

subsect ion 104(13.1) and $1,000 of taxable capi ta l gains under subsect ion 104(13.2) , against which the losses are appl ied.

Determine the amount designated under subsect ion 104(13.1) for Josh as fo l lows:

A ÷ B × C

$3,000 ÷ $6,000 × $5,000 = $2,500

Therefore, the amount designated for Josh is $2,500. Because Ashley shares equal ly, her calculat ion is the same.

Determine the amount designated under subsect ion 104(13.2) for Josh as fo l lows:

A ÷ B × C

$1,500 ÷ $3,000 × $1,000 = $500

Therefore, the amount designated for Josh is $500. Because Ashley shares equal ly, her calculat ion is the same.

– 248 –

Preferred beneficiary elect ion

A trust and a preferred benef iciary can joint ly elect, in the year, to include in a preferred benef iciary's income for that year, al l or part of the trust 's accumulat ing income for the year. You can deduct the elected amount from the trust 's income, up to the amount of the accumulat ing income. The elected amount for a preferred benef ic iary must not be more than the al locable amount of the trust 's total accumulat ing income. We define "Preferred benef iciary" on page 25 [6].

The preferred benef ic iary e lect ion cannot be made by the t rusts l is ted under "Exempt ion f rom Form T1055 deemed disposi t ions" on page 207 [40] .

For the t rusts l is ted below, you can only make the e lect ion for the fo l lowing:

• a spousal or common- law partner t rust , in respect of the benef ic iary spouse or common- law partner whi le the benef ic iary spouse or common- law partner is al ive

– 249 –

• a jo int spousal or common- law par tner t rust , in respect of the set t lor or the benef ic iary spouse or common- law partner whi le e i ther of them is a l ive

• an a l ter ego t rust , in respect of the set t lor whi le the set t lor is s t i l l a l ive

A t rust 's accumulat ing income for the year is general ly i ts income for the year af ter deduct ions, but wi thout regard to amounts a l located under preferred benef ic iary e lect ions.

Accumulat ing income does not inc lude the income f rom the deemed disposi t ion of capi ta l property, land inventory, or resource property on the death of :

• the benef ic iary spouse or common- law par tner , for a spousal or common- law partner t rust

• the set t lor or the benef ic iary spouse or common- law partner , whichever is la ter , for a jo int spousal or common- law partner t rust

• the set t lor , for an a l ter ego t rust

– 250 –

Accumulat ing income also does not inc lude income ar is ing f rom the deemed disposi t ion of property to a benef ic iary that resul ts in a d isposi t ion of a l l or par t of the benef ic iary's capi ta l in terest in the t rust , when the property is d is t r ibuted to a benef ic iary other than al l o f the fo l lowing:

• the benef ic iary spouse or common- law partner for a post-1971 spousal or common- law partner t rust i f the benef ic iary spouse or common- law partner is al ive

• the set t lor or the benef ic iary spouse or common- law par tner , for a jo int spousal or common- law partner t rust i f e i ther of them is a l ive

• the set t lor , for an a l ter ego t rust , i f the set t lor is a l ive

Accumulat ing income of a t rust does not inc lude amounts paid or deemed to have been paid f rom an Agr i Invest Fund 2. However, a preferred benef ic iary e lect ion can inc lude these amounts paid to a testamentary spousal or common- law partner t rust whi le the benef ic iary spouse or common- law partner was st i l l a l ive.

– 251 –

Note Accumulat ing income is calculated as i f you have deducted the maximum amount of income that became payable in the year to the benef ic iar ies.

You can make a preferred benef ic iary e lect ion for a tax year by f i l ing the fo l lowing: • a s tatement making the e lect ion for the year, s tat ing the par t of the

accumulat ing income on which you are making the e lect ion, and s igned by both the preferred benef ic iary (or guardian) and the t rustee wi th the author i ty to make the e lect ion

• a s tatement s igned by the t rustee showing the calculat ion of the amount of the benef ic iary's share of the accumulat ing income, and indicat ing the benef ic iary's socia l insurance number, h is or her re lat ionship to the set t lor of the t rust , and whether one of the fo l lowing condi t ions is met :

– the benef ic iary is c la iming a d isabi l i ty amount

– a support ing indiv idual is c la iming a d isabi l i t y amount for that benef ic iary ( i f yes , prov ide the name, address, and socia l insurance number of the support ing indiv idual)

– 252 –

– the benef ic iary is 18 years of age or o lder , and in the benef ic iary's tax year that ends in the t rust 's tax year, another indiv idual can c la im an amount for an inf i rm dependant age 18 or o lder for that benef ic iary, or could c la im the amount i f the benef ic iary's income is calculated before inc luding the income f rom the preferred benef ic iary e lect ion. I f th is is the case, provide a statement f rom the medical pract i t ioner conf i rming the benef ic iary's impairment in the f i rs t year the c la im is made

Fi le the e lect ion wi th the return or separate ly, no later than 90 days af ter the end of the t rust 's tax year for which the e lect ion was made. For a preferred benef ic iary e lect ion to be val id, you have to f i le i t on t ime. I f you f i le the e lect ion late, we wi l l tax the accumulat ing income in the t rust . For more informat ion regarding late- f i led or amended elect ions, see "Elect ions" on page 106 [21] .

I f you are making a preferred benef ic iary e lect ion, see archived Interpretat ion Bul let in IT-394, Preferred Benef ic iary Elect ion.

– 253 –

Preferred beneficiary elect ion and the quali f ied disabi l i ty trust elect ion

The int roduct ion of the qual i f ied d isabi l i t y t rust (QDT) provis ions has not restr icted the avai labi l i t y of the preferred benef ic iary e lect ion, nor have there been any changes to the method in which a preferred benef ic iary e lect ion is made. Many of the requis i te condi t ions for making a preferred benef ic iary elec t ion d i f fer f rom those requi red for a t rust to be a QDT. Accordingly, where the respect ive condi t ions of each e lect ion are met, the t rust has the abi l i ty to choose whether to make a preferred benef ic iary e lect ion or a QDT elect ion. I t is a lso possib le for a t rust which e lects to be a QDT to a lso make a preferred benef ic iary e lect ion ( jo int ly wi th the benef ic iary) in a g iven tax year .

▲ How to complete Schedule 9

Report a l located income using the columns provided:

Column 1 – income paid or payable to resident benef ic iar ies

Column 2 – income paid or payable to non-resident benef ic iar ies

Column 3 – income al located by a preferred beneficiary elect ion

– 254 –

For more informat ion, see the appropriate column heading in the fol lowing sect ions. Any amounts al located to a benef ic iary on l ines 921 to 926 and on l ine 949 are general ly deducted from the trust 's income.

Before a l locat ing income to the benef ic iar ies, you must f i rs t take into considerat ion the t rust 's expenses. I f the t rust c la imed expenses on l ine 41 of the return, deduct them f rom the speci f ic source of income to which the expense re lates. I f the expense re lates to more than one source of income, you must d iv ide i t between the appl icable sources of income. The t rust can then a l locate the remaining income to the benef ic iar ies.

▲ Column 1 – Resident

Inc lude in th is column, al locat ions and designat ions of income paid or payable to res ident benef ic iar ies . I f the income is a l located, but no amounts are designated, enter the tota l amount on l ine 926. I f you are designat ing the income, enter the amounts on the appropr iate l ines. In addi t ion, use Part B for other amounts you are designat ing to the benef ic iar ies.

– 255 –

For more informat ion, see:

• "Al locat ions and designat ions" on page 225 [43]

• archived Interpretat ion Bul let in IT-286, Trusts – Amount Payable

• archived Interpretat ion Bul let in IT-342, Trusts – Income Payable to Benef ic iar ies

▲ Column 2 – Non-resident

Inc lude in th is column, al locat ions and designat ions of income paid or payable to non-resident benef ic iar ies. I f the income is a l located, but no amounts are designated, enter the tota l amount on l ine 926. Report the tota l of the amounts in column 2 as estate or t rust income on an NR4 s l ip , not on a T3 s l ip .

Most amounts paid or payable to non-resident benef ic iar ies are subject to a Part XI I I wi thhold ing tax. For more informat ion, see "Part B – Calculat ing Part XI I I non-resident wi thhold ing tax" on page 280 [53] . Enter the tota l of co lumn 2 on l ine 15 of Schedule 10.

– 256 –

I f you a l locate cer ta in income to non-resident benef ic iar ies, the t rust may a lso be subject to Par t XI I .2 tax. When al locat ing such income, inc lude the fu l l amount before deduct ing Par t XI I .2 tax. For more informat ion, see "Schedule 10 – Part XI I .2 Tax and Part XI I I Non-Resident Withhold ing Tax" on page 271 [51] .

▲ Column 3 – By preferred benef ic iary e lect ion

A trust and a preferred benef ic iary can jo int ly e lect to have the t rust 's accumulat ing income taxed in the hands of the preferred benef ic iary. Use column 3 to a l locate and designate the e lected accumulat ing income. Complete a separate T3 s l ip for th is income.

You can designate a l l o f the fo l lowing types of income under a preferred benef ic iary e lect ion:

• taxable capi ta l gains ( l ine 921)

• actual amount of d iv idends f rom taxable Canadian corporat ions, both e l ig ib le d iv idends ( l ine 949) and d iv idends other than e l ig ib le d iv idends ( l ine 923)

• fore ign business income ( l ine 924)

– 257 –

• fore ign non-business income ( l ine 925)

You have to make the designat ions on the t rust 's return for the year in which you inc lude the re levant amounts in the t rust 's income. I f the income is a l located but no amounts are designated, enter the tota l amount on l ine 926. I f you are designat ing the income, enter the amounts on the appropr iate l ines. In addi t ion, use Part B for other amounts you are designat ing to the benef ic iar ies.

▲ Part A – Total income al locat ions and designat ions to benef ic iar ies Lines 921 to 928 and 949

Answer a l l s ix quest ions, and at tach any necessary statements. For in format ion about income at t r ibuted to the t ransferor , see "Transfers and loans of property" on page 232 [44] .

▲ L ine 921 – Taxable capi ta l gains

You can a l locate a l l or par t of a Canadian res ident t rust 's net taxable capital gains to a benefic iary. I f you designate this amount, we consider i t to be the benef iciary's taxable capital gain.

– 258 –

A t rust 's net taxable capital gain is the amount by which the tota l of the t rust 's taxable capi ta l gains for a tax year (which inc ludes, amounts that are deemed to be taxable capi ta l gains to the t rust for the year) , is more than the tota l of :

• the t rust 's a l lowable capi ta l losses for the tax year (except , a l lowable business investment losses)

• net capi ta l losses of other years deducted in calculat ing the t rust 's taxable income for the tax year

When calculat ing the maximum net taxable capital gains avai lable for designat ion in the current year, you have to reduce the net taxable capital gains (as calculated on page 245 [above] ) by both of the fol lowing:

• Any expenses the t rust incurred to earn income inc luded on l ine 01 of the return.

• Amounts designated under subsect ion 104(13.2) to be taxed in the t rust , other than amounts for which a deduct ion has been c la imed on l ine 52. For more informat ion, see " Income to be taxed in the t rust" on page 242 [46] .

– 259 –

Note I f the amount on l ine 01 inc ludes any deemed taxable capi ta l gains ( inc luding g i f ts of capi ta l property) , ca l l 1-800-959-8281 for more informat ion.

You have to inc lude both of the fo l lowing in the amounts you enter on l ine 921:

• capi ta l gains d is t r ibut ions des ignated as payable by a mutual fund t rust to a non-resident benef ic iary

• net taxable capi ta l gains a l located by a t rust governed by an employee benef i t p lan

I f you complete l ine 921 and you are a l locat ing capi ta l gains e l ig ib le for the capi ta l gains deduct ion, you a lso have to complete l ine 930. The only taxable capi ta l gains e l ig ib le for th is deduct ion are f rom the d isposi t ion of qual i f ied farm or f ish ing property made af ter May 1, 2006, and qual i f ied smal l business corporat ion shares.

– 260 –

▲ L ine 922 – Lump-sum pension income

In a year throughout which a testamentary t rust was a res ident of Canada, i t can designate to a benef ic iary a l l o f the fo l lowing:

• cer ta in pension income

• superannuat ion benef i ts

• amounts received f rom a deferred prof i t shar ing p lan

Complete Schedule 7, Pension Income Al locat ions and Designat ions. Enter on l ine 922, those amounts f rom Schedule 7 that qual i fy for a t ransfer to a registered pension p lan or a registered ret i rement savings p lan.

▲ Line 923 – Actual amount of div idends other than el igible div idends

Enter on th is l ine the t rust 's actual amount of d iv idends other than e l ig ib le d iv idends designated to benef ic iar ies of the t rust in the year.

– 261 –

▲ L ine 924 – Foreign business income

Enter on l ine 924 the t rust 's fore ign business income designated to the benef ic iar ies in the year .

▲ L ine 925 – Foreign non-business income

Enter a l l fore ign non-business income designated to benef ic iar ies. This may inc lude income f rom a fore ign pension or in terest f rom fore ign sources.

▲ L ine 926 – Other income

Enter on this l ine al l income al located to beneficiar ies that is not shown on l ines 921 to 925 or l ine 949. This includes business, farming, f ishing, or rental income, interest or pension income (other than from foreign sources and lump-sum pension income included on l ine 922), death benef i ts, ret i r ing al lowances, and dividends under a dividend rental arrangement. Include the amount of any taxable benefi ts to resident benef iciar ies under the t rust, unless the amounts are included on l ines 921, 923 or 949.

– 262 –

Note The tota l of the taxable benef i ts inc luded on l ines 921, 923, 926 and 949 should be the same as the tota l taxable benef i ts reported on l ine 45 of the T3 return.

A graduated rate estate may be able to des ignate, in a year throughout which i t was a res ident in Canada, a lump-sum payment out of a registered pension p lan to a benef ic iary to acquire an annui ty. Inc lude these amounts f rom Schedule 7, Pension Income Al locat ions and Designat ions, on l ine 926. Show on l ine 946 the amount that qual i f ies for a t ransfer .

▲ L ine 949 – Actual amount of e l ig ib le d iv idends

Enter the actual amount of net e l ig ib le d iv idends, af ter re lated expenses, designated to benef ic iar ies in the year .

▲ L ine 928 – Totals

The tota l of l ines 921 to 926, p lus l ine 949 is the income al located to the benef ic iar ies. The amount cannot be more than " Income before a l locat ions" on l ine 46 of the return.

– 263 –

▲ Part B – Summary of other amounts designated to benef ic iar ies L ines 930 to 951

Complete th is area only when there are designat ions, such as d iv idends f rom taxable Canadian corporat ions, fore ign taxes paid for credi t purposes, and pens ion income or ret i r ing a l lowances qual i fy ing for a t ransfer .

Line 930 – Taxable capi ta l gains e l ig ib le for deduct ion

A personal t rust that makes a designat ion on l ine 921 and has e l ig ib le taxable capi ta l gains, a lso has to designate a por t ion of the t rust 's e l ig ib le taxable capi ta l gains to the benef ic iary for the benef ic iary's capi ta l gains deduct ion.

Calculate the t rust 's e l ig ib le taxable capi ta l gains on Schedule 3. Enter on l ine 930, the lesser o f the fo l lowing amounts:

• the amount on l ine 921

• the amount on l ine 30 of Schedule 3

– 264 –

▲ L ine 931 – Qual i fy ing pension income

Enter those amounts f rom Schedule 7, Pension Income Al locat ions and Designat ions, that qual i fy for the pension income amount . You can make th is designat ion only i f the benef ic iary was the spouse or common- law partner of the deceased, and i f the t rust received the benef i ts of a l i fe annui ty f rom a superannuat ion or pension p lan.

▲ L ine 932 – Taxable amount of d iv idends other than el ig ib le d iv idends

I f you are designat ing div idends other than el igible dividends to a benef iciary who is ei ther an indiv idual or a trust (other than a registered chari ty), enter the result of the amount from l ine 923 mult ipl ied by 1.16.

Line 933 – Foreign business income tax paid

Enter the t rust 's fore ign business income tax paid and designated to the benef ic iar ies of the t rust in the year on l ine 933.

– 265 –

Line 934 – Foreign non-business income tax paid I f you are designat ing a fore ign tax credi t to a benef ic iary, you have to submit an of f ic ia l receipt or in format ion s l ip f rom the foreign country. This is necessary to support the c la im that the t rust paid fore ign non-business income tax, or that i t was wi thheld f rom foreign non-business income the t rust earned.

The port ion of fore ign taxes you des ignate to a benef ic iary has to be in proport ion to the foreign income you designate to that benef ic iary. You have to convert any fore ign taxes paid in fore ign currency to Canadian funds.

For more informat ion, see Income Tax Fol io S5-F2-C1, Foreign Tax Credi t , archived Interpretat ion Bul let in IT-201, Foreign Tax Credi t – Trusts and Benef ic iar ies, and see "L ine 23 – Federal fore ign tax credi t " on page 291 [55] .

▲ L ine 935 – El ig ib le death benef i ts

A testamentary t rust may receive a payment as a resul t of the employee's death to recognize the employee's serv ice in an of f ice or employment . Such a payment is usual ly f rom the deceased person's

– 266 –

employer or f rom a t rust fund the employer establ ished. This payment may qual i fy as a death benefi t , and the t rust may be able to exclude up to $10,000 of the amount f rom income.

I f you a l locate the tota l death benef i t to a s ingle benef ic iary according to the provis ions of the wi l l , the benef ic iary may be able to exclude up to $10,000 of the payment f rom income. Enter on l ine 935, the amount f rom l ine 926 e l ig ib le for th is exclus ion.

I f you a l locate the tota l death benef i t to more than one benef ic iary, apport ion the amount e l ig ib le for th is exclus ion among those benef ic iar ies. The tota l e l ig ib le amount apport ioned cannot exceed $10,000. The benef iciar ies can use this information to calculate the taxable port ion that they have to report on their T1 returns.

I f you exclude the e l ig ib le death benef i t f rom the t rust 's income, only the taxable por t ion f lows out to the benef ic iary. Report only the taxable por t ion of the death benef i t on l ine 19 of the T3 return. For more informat ion, see "L ine 19 – Other income" on page 134 [26] .

– 267 –

Line 937 – Insurance segregated fund net capi ta l losses

Enter the designated por t ion of net capi ta l losses f rom the disposi t ion of property by an insurance segregated fund.

Line 938 – Part XI I .2 tax credi t

Calculate the amount for l ine 14 of Schedule 10, and enter i t here. General ly, you can designate the Part XI I .2 tax credi t only to those resident benef ic iar ies to whom you al located income in column 1 of l ine 928, Schedule 9.

▲ L ine 939 – Div idend tax credi t for d iv idends other than e l ig ib le d iv idends

Enter the resul t o f the amount f rom l ine 932 mul t ip l ied by 10.0313%.

Lines 940 and 941 – Investment tax credi t ( ITC)

For 2016 and subsequent years, only graduated rate estates and communal organizat ions that are deemed to be inter v ivos t rusts can designate an ITC to thei r benef ic iar ies.

– 268 –

Complete Part A of Form T2038(IND), Investment Tax Credi t ( Indiv iduals) , to calculate the amount of the investment cost or expendi ture and the ITC avai lable. You wi l l need the e l ig ib le amounts the t rust invested to acquire property and the e l ig ib le expendi tures for th is par t of the form.

You have to reduce the t rust 's ITC by any amount a l located to benef ic iar ies.

Enter the benef ic iar ies ' share of the t rust 's investment cost or expendi tures on l ine 940. You need th is amount to determine the amount of the ITC you can designate to each benef ic iary.

Enter on l ine 941, the amount of the t rust 's ITC f rom Form T2038(IND) that you des ignated to a benef ic iary and did not deduct on l ine 26 of the t rust 's Schedule 11.

Line 942 – Amount resul t ing in cost base adjustment

Enter the amount by which the cost base of a benef ic iary's in terest in the t rust may be reduced or increased.

– 269 –

Note I f you issued new units to a beneficiary in sat isfact ion of a distr ibut ion of income, do not include that amount here. Instead, advise the benef iciary that you have issued these units, as wel l as the number of units and their value.

Line 945 – Other credi ts

Research and development tax credit

This credi t is avai lable to a t rust res ident in Newfoundland and Labrador, or Yukon. Enter the amount of th is credi t that you designated to a benef ic iary and d id not deduct on page 4 of the return. For more informat ion, see "L ine 91 – Other credi ts" on page 159 [31] .

▲ L ine 946 – Pension income qual i fy ing for an e l ig ib le annui ty for a minor

Enter those amounts f rom Column D of Schedule 7, Pension Income Al locat ions and Designat ions, that qual i fy for an e l ig ib le annui ty for a minor on l ine 946.

– 270 –

Line 947 – Ret i r ing a l lowance qual i fy ing for t ransfer to an RPP or an RRSP

Enter any ret i r ing a l lowance e l ig ib le for a t ransfer to an RPP or an RRSP on l ine 947.

Line 948 – El ig ib le amount of char i table donat ions

Enter char i table donat ions des ignated to the benef ic iar ies of a communal organizat ion on l ine 948.

▲ L ine 950 – Taxable amount of e l ig ib le d iv idends

I f you are designat ing e l ig ib le d iv idends to a benef ic iary who is e i ther an indiv idual or a t rust (other than a registered char i ty) , enter the resul t o f the amount f rom l ine 949 mul t ip l ied by 1.38.

▲ L ine 951 – Div idend tax credi t for e l ig ib le d iv idends

Enter the resul t o f the amount f rom l ine 950 mul t ip l ied by 15.0198%.

– 271 –

Schedule 10 – Part XII .2 Tax and Part XII I Non-Resident Withholding Tax Complete Schedule 10 i f the t rust is a l locat ing income to designated benef ic iar ies where the t rust has speci f ied income (see the next sect ion for deta i ls) . The tota l of Par t XI I .2 and Part XI I I tax is approximate ly equal to the Part I tax, p lus prov inc ia l or terr i tor ia l taxes, that would apply to the income i f the benef ic iar ies were resident in Canada.

Tax t ip I f the t rust is a non-res ident t rust wi th investments in Canadian mutual funds, i t may have paid Part XI I I .2 tax dur ing the tax year . The t rust may be e l ig ib le to c la im a refund of th is tax. The t rust may also qual i fy i f i t real ized a Canadian mutual fund loss dur ing the tax year. I f th is appl ies to you, see Form T1262, Part XI I I .2 Tax Return for Non-Resident 's Investments in Canadian Mutual Funds.

– 272 –

Part A – Calculat ing Part XI I .2 tax and the refundable Part XI I .2 tax credi t Lines 1 to 14

Pay any Part XI I .2 tax no later than 90 days af ter the t rust 's tax year-end.

Par t XI I .2 tax applies when a t rust meets a l l o f the fo l lowing condi t ions:

• has speci f ied income as descr ibed on page 272 [on th is page]

• has a designated benefic iary as described on page 273 [on this page]

• a l locates or designates any of i ts income

Part XI I .2 tax does not apply to a t rust that was one of the fo l lowing throughout the year:

• a graduated rate estate

• a mutual fund t rust

• a speci f ied t rust (as def ined in "Char t 1 – Types of Trusts" on page 30 [8] ) , unless the t rust is a related segregated fund t rust ,

– 273 –

a ret i rement compensat ion arrangement t rust , a t rust whose di rect benef ic iar ies are speci f ied t rusts, a t rust governed by an e l ig ib le funeral arrangement, a cemetery t rust and, in cer ta in c i rcumstances, an amateur ath lete t rust

• a t rust that was exempt f rom Part I tax under subsect ion 149(1)

• a non-resident t rust

• a deemed resident t rust

Specif ied income

Speci f ied income of a t rust general ly means i ts taxable capi ta l gains or a l lowable capi ta l losses f rom the d isposi t ion of taxable Canadian property, cer ta in property t ransferred to a t rust in contemplat ion of a person benef icial ly interested in the trust ceasing to be resident in Canada, and the total income (or loss) from al l of the fol lowing sources:

• businesses carr ied on in Canada

• real propert ies located in Canada, such as land or bui ld ings

• t imber resource propert ies

– 274 –

• Canadian resource propert ies the t rust acquired af ter 1971

Note Although the term designated income is used in Part XI I .2 of the Act , we use speci f ied income in th is guide and on Schedule 10 to avoid confusion wi th the term "designated income" used in other par ts of th is guide.

Designated beneficiary

Subject to al l of the exclusions l isted below, for the purpose of Part XII.2 tax, a designated benef ic iary under a par t icu lar t rust at any t ime, inc ludes:

• a non-resident person

• a person who is exempt f rom Part I tax on a l l or par t of thei r taxable income under subsect ion 149(1) , where that person acquired an interest as a benef ic iary under the par t icu lar t rust af ter October 1, 1987 d i rect ly or indi rect ly f rom a benef ic iary under the t rust . For example, there are two except ions to th is ru le. A person exempt f rom Part I tax is not a designated benef ic iary i f :

– 275 –

• the interest has been owned cont inuously s ince the later of October 1, 1987 and the date on which the t rust was created, by persons who were exempt f rom Part I tax on a l l o f thei r taxable income under subsect ion 149(1)

• the person is a t rust governed by an RRSP or RRIF that acquired the interest d i rect ly or indi rect ly f rom an indiv idual , the spouse or common- law partner , or former spouse or common- law partner of the indiv idual who was, a benef ic iary under the t rust governed by the p lan or fund

• another t rust i f any of i ts benef ic iar ies is e i ther a t rust or a designated benef ic iary

• a partnership i f any of i ts members is ei ther a partnership or would be a designated benefic iary i f that member held an interest in a trust

A designated benef ic iary does not inc lude any of the fo l lowing:

• a mutual fund t rust res ident in Canada

• a graduated rate estate

– 276 –

• an RRSP or RRIF that acquired i ts in terest d i rect ly or indi rect ly f rom i ts benef ic iary, the benef ic iary's spouse or common- law partner , or former spouse or common- law partner

• an ent i ty that is exempt f rom Part I tax i f i ts in terest in the t rust has been owned cont inuously s ince October 1, 1987, or the date on which the t rust was created, by one or more ent i t ies that are exempt f rom Part I tax under subsect ion 149(1)

• a par tnership, which would otherwise be a des ignated benef ic iary, where no members of the par tnership are des ignated benef ic iar ies and the par tnership 's in terest in the t rust has never been held by anyone other than the par tnership or an ent i ty that is exempt f rom Part I tax under subsect ion 149(1)

• a t rust , the benef ic iar ies of which are a l l e i ther t rusts that have no designated benef ic iar ies, or persons who are not designated benef ic iar ies

– 277 –

A designated benef ic iary is usual ly not ent i t led to the refundable tax credi t for Par t XI I .2 tax that the t rust paid. This means that you wi l l general ly not complete box 38 on the T3 s l ip for a designated benef ic iary who is a Canadian res ident . Also, before you calculate Part XI I I non-resident wi thhold ing tax, you have to reduce the income payable to a non-resident benef ic iary by the non-resident 's share of the Part XI I .2 tax. For more informat ion, see "L ine 13 – (Adjustment for Part XI I I tax purposes)" on th is page 279 [53] .

Eligible beneficiary

This term is used for a benef ic iary who is not a designated benef ic iary as descr ibed on page 274 [52] . An e l ig ib le benef ic iary is general ly a Canadian resident who is ent i t led to a refundable Part XI I .2 tax credi t in proport ion to the share of a l located or designated t rust income. You have to inc lude an amount equal to the Part XI I .2 tax credi t in the income al located to the benef ic iary. In ef fect , th is credi t replaces the income that the benef ic iary would have received i f the t rust d id not have to pay Part XI I .2 tax.

– 278 –

Line 6 – Tota l speci f ied income This is the tota l of l ines 1 to 5, which represents the speci f ied income of the t rust . Par t XI I .2 tax does not apply i f the amount on l ine 6 is negat ive.

Lines 7, 8, 10, and 11 – Adjusted amounts a l located and designated to benef ic iar ies Enter on l ine 7, the amount f rom column 1 of l ine 928, Schedule 9. Enter on l ine 8, the amount f rom column 2 of l ine 928, Schedule 9. Enter on l ine 10, the taxable benef i ts you repor ted on l ine 44 of the return.

L ine 11 represents both of the fo l lowing amounts: • the deduct ion f rom t rust income for the por t ion of the t rust 's income

you a l located to res ident and non-resident benef ic iar ies, to be inc luded in thei r income

• the deduct ion f rom t rust income for the Part XI I .2 tax the t rust paid for the year

Withhold the Part XI I .2 tax f rom income you dis t r ibute to the benef ic iar ies.

– 279 –

Line 12 – Part XI I .2 tax payable

Mult ip ly by 40%, the lesser o f the amount on l ine 6 and the amount on l ine 11. Enter the resul t on l ine 83 of the return.

Line 13 – (Adjustment for Par t XI I I tax purposes)

Calculate the amount of Part XI I .2 tax that you at t r ibute to non-resident benef ic iar ies. Transfer the amount f rom l ine 13 to l ine 21 to reduce the income subject to Part XI I I tax.

Line 14 – Part XI I .2 refundable tax credi t for e l ig ib le benef ic iar ies

This is the amount of Part XII .2 tax attr ibutable to el igible benef iciar ies. I t is also the amount el igible for the Part XII .2 refundable tax credi t for these benef ic iar ies.

I f there is more than one e l ig ib le benef ic iary, use the formula below to determine the amount of refundable tax credi t to report in box 38 of the T3 s l ip for each e l ig ib le benef ic iary:

– 280 –

A × B ÷ C

where:

A = Part XI I .2 tax paid by the t rust ( l ine 12)

B = each e l ig ib le benef ic iary's share of the amount f rom l ine 11 ( the t rust income you al located to the e l ig ib le benef ic iar ies)

C = adjusted a l locat ions or designat ions for the year ( l ine 11)

Part B – Calculat ing Part XI I I non-resident wi thhold ing tax

Lines 15 to 27

Complete th is par t i f the t rust a l located income to non-resident benef ic iar ies.

Line 18 – Taxable capi ta l gains d ist r ibut ions designated as payable by a mutual fund t rust After March 22, 2004, a mutual fund t rust that designates more than 5% of i ts capi ta l gains d is t r ibut ions to non-resident benef ic iar ies

– 281 –

( inc luding any par tnership that is not a Canadian par tnership) must do an addi t ional calculat ion for l ine 18. I f th is appl ies to the t rust , complete l ines 28 to 47 at the bot tom of Part B. Enter the amount f rom l ine 43 of Schedule 10 on l ine 18.

Line 20 – Amounts not subject to Part XI I I tax: Other One example of an amount to enter on th is l ine is an amount you paid or credi ted to a benef ic iary res ident in the Uni ted States, when the amount is der ived f rom income sources outs ide Canada and i t is not subject to wi thhold ing tax under the Canada – U.S. Tax Convent ion.

Line 21 – (Part XI I .2 tax amount) On th is l ine, enter the amount f rom l ine 13, which is the amount of Part XI I .2 tax you at t r ibute to designated benef ic iar ies.

Line 23 – Taxable Canadian property gains d is t r ibut ions for non-resident benef ic iar ies A mutual fund t rust that designates more than 5% of i ts capi ta l gains d is t r ibut ions to non-resident benef ic iar ies ( inc luding any par tnership that is not a Canadian par tnership) must inc lude a por t ion of the

– 282 –

d is t r ibut ions when calcu lat ing Part XI I I tax. Enter the amount calculated at l ine 42 of Schedule 10 on l ine 23.

Lines 25 to 27 – Non-resident tax payable

Complete the rest of th is schedule by referr ing to the NR4 return for the t rust .

Every non-resident person has to pay Canadian income tax of 25% under Part XI I I o f the Act , unless a tax t reaty or convent ion provides a lower rate. Par t XI I I tax is paid on amounts that a Canadian t rust paid or credi ted, or is considered to have paid or credi ted, to non-residents. You have to wi thhold and remit tax on these amounts. This tax has to be received by the Canada Revenue Agency or a Canadian f inancia l ins t i tu t ion on or before the 15th day of the month af ter the month dur ing which the tax was wi thheld.

Calculate the amount of non-resident tax payable and any balance due by fo l lowing the steps in Part B of Schedule 10. Send any balance due to us, wi th Form NR76, Non-Resident Tax – Statement of Account , which is a combined remit tance statement and receipt .

– 283 –

I f you are remit t ing Part XI I I tax for the f i rs t t ime, send us a statement wi th the t rust 's name and address, the type of payment (Part XI I I tax) , and the month dur ing which you wi thheld the tax. When we receive the payment, we wi l l issue Form NR76. You can use the bot tom port ion for remi t t ing future payments.

You also have to complete an NR4 Summary, Summary of Amounts Paid or Credi ted to Non-Residents of Canada, and an NR4 sl ip , Statement of Amounts Paid or Credi ted to Non-Residents of Canada.

For more informat ion on non-resident income tax, see: • In format ion Circular IC76-12, Appl icable rate of par t XI I I tax on

amounts paid or credi ted to persons in countr ies wi th which Canada has a tax convent ion

• In format ion Circular IC77-16, Non-Resident Income Tax • archived Interpretat ion Bul let in IT-465, Non-Resident Benef ic iar ies

of Trusts

Example An inter v ivos t rust res ident in Canada has two benef ic iar ies: Karson, a res ident of Canada who is an el igible benef ic iary, and

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Teagan, a non-resident who is a designated benef ic iary. Each benef ic iary is ent i t led to receive an equal share of the t rust income that is d is t r ibuted annual ly.

The t rust has $1,400 net income for the year, which inc ludes net business income ( f rom a business carr ied on in Canada) of $1,000, and net in terest income of $400.

On Schedule 10, the t rustee would do a l l o f the fo l lowing:

• enter $1,000 on l ines 1 and 6, s ince there are no other sources of speci f ied income ( the $400 interest is not speci f ied income)

• enter $1,400 on l ine 11, s ince th is is the tota l amount f rom columns 1 and 2 of l ine 928 of Schedule 9

• enter the lesser o f l ines 6 ($1,000) and 11 ($1,400) in the calculat ion area for l ine 12

• mul t ip ly $1,000 by 40%, and enter the resul t ($400) on l ine 12

• ca lculate the amount that is not subject to Part XI I I non-res ident tax by complet ing the calculat ion area for l ine 13 (d iv ide $700 by $1,400 and mul t ip ly by $400) . Enter the resul t ($200) on l ine 13 and on l ine 21

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• ca lculate the amount of refundable Part XI I .2 tax credi t on l ine 14 by subtract ing l ine 13 ($200) f rom l ine 12 ($400). Enter the resul t ($200) in box 38 on the T3 s l ip

Karson received $500, but he wi l l inc lude $700 ($500 + $200) in h is income for the year. This amount , which is entered in box 26 on the T3 s l ip , is the 50% port ion of the t rust income dist r ibuted to h im under the terms of the t rust agreement. On his T1 return he wi l l c la im a refundable Part XI I .2 tax credi t o f $200.

Teagan received $500. This amount, which is entered on the NR4 sl ip, is the 50% of the trust income distr ibuted to her under the terms of the trust agreement. On Schedule 10, the trustee reduces the total income paid or payable to non-resident benefic iar ies ( l ine 15) by the Part XII .2 tax ( l ine 21). L ine 24 ($700 – $200 = $500) is the amount subject to non-res ident tax.

Completing the NR4 return

Guide T4061, NR4 – Non-Resident Tax Withhold ing, Remit t ing, and Report ing, expla ins how to repor t amounts the t rust paid or credi ted

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to non-residents of Canada and how to complete and d is t r ibute the NR4 return.

Report the tota l t rust income you a l located to a non-resident benef ic iary as estate and t rust income on the NR4 return. Types of income, except for taxable capi ta l gains f rom a mutual fund t rust , lose thei r ident i ty when al located to a non-resident benef ic iary. Therefore, you have to tota l and report them as "Gross income" in box 16 of the NR4 s l ip . In box 14 or 24, enter an income code of "11" for estate or t rust income. Enter a code of "58" i f there were taxable Canadian property gains d is t r ibut ions to the non-resident .

F i le th is return no later than 90 days af ter the end of the t rust 's tax year.

Schedule 11 – Federal Income Tax Use Schedule 11 to determine the federal income tax payable by the t rust .

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Note

The t rust may be subject to min imum tax. For more informat ion, see "Schedule 12 – Minimum Tax" on page 309 [58] .

Lines 8 and 9 – Federal tax on taxable income

▲ Graduated Rate Estates (GRE) or Quali f ied Disabil i ty Trusts (QDT)

A graduated rate estate or a qual i f ied d isabi l i t y t rust is taxed on i ts taxable income for the year at the federal tax rates for indiv iduals. For more informat ion on these types of t rusts, see the descr ipt ion in "Chart 1 – Types of Trusts" on page 30 [8] .

Trusts other than GRE and QDT

Trusts other than a GRE or a QDT are taxed on thei r taxable income for the year at the h ighest indiv idual rate of 33%.

In addi t ion, inc lude any tax payable by a speci f ied investment f low-through (SIFT) t rust . For more informat ion on SIFT t rusts and thei r tax calculat ion, go to canada.ca/cra-sif t - trust .

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▲ L ine 11 – Federal recovery tax

Use this l ine to enter the result f rom the calculat ion on Form T3QDT-WS, Recovery Tax Worksheet.

Recovery Tax

A trust that was a qual i f ied d isabi l i t y t rust in a previous tax year is subject to the new recovery tax in a year i f one of the fo l lowing condi t ions is met:

• The t rust ceases dur ing the year to have among i ts benef ic iar ies any indiv iduals who in one or more ear l ier tax years of the t rust were e lect ing benef ic iar ies of the t rust . This wi l l inc lude the year in which the e lect ing benef ic iary of the t rust (or i f the t rust had more than one e lect ing benef ic iary, the last of them) d ies.

• The year is the tax year deemed to have ended because the t rust ceased to be res ident in Canada.

• The t rust d is t r ibutes capi ta l to a benef ic iary other than an indiv idual who is an e lect ing benef ic iary for a par t icu lar year or was an e lect ing benef ic iary of the t rust in an ear l ier tax year. The making

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by the t rust of an amount payable out of the t rust 's income for a year ( i .e . , the f lowing out of i ts current income), or the subsequent sat is fact ion of a benef ic iary's r ight to enforce such an amount , does not t r igger the appl icat ion of the recovery tax. A payment to a benef ic iary in the benef ic iary's capaci ty as a credi tor of the t rust a lso does not t r igger the appl icat ion of the recovery tax.

▲ L ines 13 to 15 – Federal d iv idend tax credi t

Complete these l ines i f the t rust reported a gross-up amount on l ine 24 or l ine 31 of Schedule 8 for d iv idends received f rom a taxable Canadian corporat ion in the tax year .

Calculate the d iv idend tax credi t for e l ig ib le d iv idends by mul t ip ly ing the gross-up amount f rom l ine 24 of Schedule 8 by 54.5455%. Calculate the d iv idend tax credi t for d iv idends other than e l ig ib le d iv idends by mul t ip ly ing the gross-up amount f rom l ine 31 of Schedule 8 by 72.7273%. Enter the tota l of these amounts on l ine 15.

Note Foreign d iv idends do not qual i fy for th is credi t .

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▲ L ine 16 – Donat ions and gi f ts tax credi t

Enter the amount f rom l ine 31 of Schedule 11A. At tach of f ic ia l receipts for a l l c la ims to the return.

Line 19 – Min imum tax carryover f rom previous years I f the t rust paid min imum tax in the 2011 to 2017 tax years, and does not have to pay minimum tax for the 2018 tax year, you may be able to c la im a credi t against the t rust 's 2018 taxes payable. Use Part 7 of Schedule 12, Min imum Tax, to calcu late the tota l min imum tax carryover .

Tax t ip You can carry over min imum tax f rom the seven previous tax years.

Line 21 – Surtax on income not subject to provinc ia l or terr i tor ia l tax A resident t rust that carr ies on business through a permanent establ ishment in a fore ign count ry has to pay a federal sur tax of 48% of i ts basic federal tax at t r ibutable to the income earned in the fore ign country.

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A non-resident t rust , or a deemed res ident t rust , pays th is tax instead of provinc ia l or terr i tor ia l tax. However, business income that the t rust earned in a province or terr i tory through a permanent establ ishment in that province or terr i tory is subject to the provinc ia l or terr i tor ia l tax instead of this 48% sur tax.

For more informat ion, see Form T3MJ, T3 Provinc ia l and Terr i tor ia l Taxes for 2018 – Mul t ip le Jur isd ic t ions.

Line 23 – Federal fore ign tax credi t

This credit is avai lable to a resident trust only for foreign income or prof i t taxes the trust paid on income i t received from sources outside Canada. When you calculate the foreign tax credit , convert al l amounts to Canadian currency. I f the amount was paid at var ious t imes throughout the year, to get the appl icable rate, go to bankofcanada.ca/rates/exchange or cal l 1-800-959-8281 .

In general , the fore ign tax credi t you can c la im for each fore ign country is the lesser of :

• the tax the t rust paid to a fore ign country

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• the tax payable to Canada on the por t ion of the income the t rust earned in the fore ign country

Use Form T3 FFT, T3 Federal Foreign Tax Credi ts , to calculate the t rust 's fore ign tax credi t . When you complete Form T3 FFT, base the calculat ion of the credi t on fore ign income amounts that have been reta ined by the t rust and not a l located to a benef ic iary. Do not inc lude any amounts re lat ing to the designat ion of fore ign income and fore ign tax credi ts to the benef ic iar ies. Enter on l ine 23, the amount f rom l ine 12 of Form T3 FFT.

The t rust 's federal fore ign tax credi t may be less than the tax paid to a fore ign country. The t rust can carry uncla imed fore ign tax paid on business income back 3 years and forward 10 years.

The t rust cannot carry forward or carry back excess amounts of any fore ign non-business income tax. You may be able to c la im some or a l l o f the excess as one of the fo l lowing:

• a provinc ia l or terr i tor ia l fore ign tax credi t on Form T3 PFT, T3 Provinc ia l or Terr i tor ia l Foreign Tax Credi t (a t rust res ident in Quebec should contact Revenu Québec about i ts ent i t lement to th is credi t )

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• a deduct ion on l ine 40 of the return (see archived Interpretat ion Bul let in IT-506, Foreign Income Taxes as a Deduct ion f rom Income)

At tach proof of the tax the t rust paid to a fore ign country.

For more informat ion, see Income Tax Fol io S5-F2-C1, Foreign Tax Credi t , and archived Interpretat ion Bul let in IT-201, Foreign Tax Credi t – Trusts and Benef ic iar ies.

Line 25 – Al lowable federal pol i t ica l contr ibut ion tax credi t

Claim th is credi t i f the t rust contr ibuted to a registered federal pol i t ica l par ty or to a candidate for e lect ion to the House of Commons. Use the char t on page 294 [below] to calculate the credi t .

For pol i t ica l contr ibut ions made af ter December 20, 2002, you have to deduct any advantage the t rust rece ives as a resul t of a contr ibut ion. This inc ludes the tota l value at the t ime the pol i t ica l contr ibut ion was made, of a l l property, serv ices, compensat ion, or other benef i ts to which the t rust , or a person not deal ing at arm's length wi th the t rust , is ent i t led as par t ia l considerat ion for , or in grat i tude for , the pol i t ica l contr ibut ion.

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Note After February 27, 2004, i f a pol i t ica l contr ibut ion is made in the form of a non-cash contr ibut ion, the amount to be used as the proceeds of d isposi t ion in respect of the property contr ibuted and the amount of the e l ig ib le contr ibut ion are considered to be the lesser of the property 's fa i r market value and i ts adjusted cost base.

Enter the tota l a l lowable credi t on l ine 25. I f the t rust 's to ta l e l ig ib le federal pol i t ical contr ibut ions are $1,275 or more, enter $650 on l ine 25. Attach an of f ic ial receipt to the return as proof of the contr ibut ion. You do not have to attach a receipt for an amount shown in box 36 of a T5013 sl ip, or in a f inancial statement showing an amount a partnership al located to the trust. For more information, see Information Circular IC75-2, Contr ibut ions to a Registered Party, a Registered Associat ion or to a Candidate at a Federal Elect ion.

Federal Poli t ical Contribution Tax Credit

I f your total federal pol i t ical contr ibut ions ( l ine 24 of your Schedule 11) were $1,275 or more, enter $650 on l ine 25 of your Schedule 11.

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Otherwise, complete the appropr iate column depending on the amount on l ine 24.

L ine 24 is $400 or less

L ine 24 is more than $400

but not more than $750

L ine 24 is more than

$750

Enter your tota l contr ibut ions.

1

– 0 00 – 400 00 – 750 00 2

Line 1 minus l ine 2 (cannot be negat ive)

= = = 3

× 75% × 50% × 33.33% 4

Mult ip ly l ine 3 by l ine 4.

= = = 5

+ 0 00 + 300 00 + 475 00 6

Add l ines 5 and 6 Enter th is amount on l ine 25 of your Schedule 11.

=

=

= 7

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Line 26 – Investment tax credi t

A trust can claim an investment tax credit ( ITC) on el igible investments and qual i f ied expenditures that are l isted on Form T2038(IND), Investment Tax Credit ( Individuals). For example, a trust can claim an ITC on certain bui ldings, machinery, or equipment to be used in certain areas of Canada in qual i f ied act iv i t ies such as farming, f ish ing, logging, or manufactur ing.

To c la im an ITC, you have to send us the completed Form T2038(IND) no later than 12 months af ter the due date of the return for the year the expendi ture occurred.

At tach a completed copy of Form T2038(IND) to the T3 return i f the t rust :

• earned an ITC in the tax year

• is carrying forward a credi t

• had an ITC recapture

• is claiming refundable ITC in the tax year (on l ine 88 of the T3 return)

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Reduce the cost of e l ig ib le investments and qual i f ied expendi tures by the por t ion of the credi t deducted or refunded. Reduce these costs in the year af ter the t rust :

• c la ims the credi t

• acquired the asset i f i t :

– made the c la im or refund in the year of acquis i t ion

– appl ied the c la im to a previous year

For example, the capi ta l cost of property is reduced in 2018 by any ITC that the t rust earned in 2017, and that was c la imed or refunded on the 2017 return or appl ied to a previous year.

You wi l l have to report an ITC recapture for the t rust i f the t rust meets the fo l lowing condi t ions:

• acquired the property in th is or any of the previous 11 tax years

• c la imed the cost , or a por t ion of the cost , of the property as a qual i f ied expendi ture for sc ient i f ic research and exper imental development

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• inc luded the cost , or a por t ion of the cost , o f the property in calculat ing the t rust 's ITC, or was the subject of an agreement to t ransfer qual i f ied expendi tures

• d isposed of the property or conver ted i t to commercia l use af ter February 23, 1998

Note An ITC recapture on a por t ion of the cost of property as descr ibed above appl ies only to d isposi t ions that occur af ter December 20, 2002.

For 2016 and subsequent tax years, only a graduated rate estate and a communal organizat ion that is t reated as a t rust can designate a l l or par t of i ts deduct ib le ITC amount to one or more of i ts benef ic iar ies, tak ing into considerat ion the terms of the t rust . For these t rusts, when calculat ing thei r ITC to be c la imed in the year, do not inc lude the amount designated on l ine 941 of Schedule 9. Reduce the cost of the qual i f ied property acquis i t ions or expendi tures by the amount of any ITC that you designated to the benef ic iar ies in the tax year.

For more informat ion, see Form T2038(IND).

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Line 32 – Addi t ional tax on RESP accumulated income payments

I f you received an accumulated income payment f rom a registered educat ion savings p lan (RESP) in the year, you may have to pay an addi t ional tax on a l l or par t of the amount in box 40 of your T4A s l ip . I f th is is the case, complete Form T1172, Addi t ional Tax on Accumulated Income Payments f rom RESPs. Enter the amount f rom l ine 10 or l ine 13 (whichever appl ies) on l ine 32 of Schedule 11. For more informat ion, see Informat ion Sheet RC4092, Registered Educat ion Savings Plans.

▲ L ine 34 – Refundable Quebec abatement

A trust may be ent i t led to an abatement of 16.5% of i ts basic federal tax.

I f the trust was resident in Quebec on the last day of i ts tax year and i t did not have income from a business with a permanent establ ishment outs ide Quebec, complete l ine 34.

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Use Form T3MJ, T3 Provinc ia l and Terr i tor ia l Taxes for 2018 – Mul t ip le Jur isd ic t ions, to calculate the refundable Quebec abatement i f one of the fo l lowing s i tuat ions appl ies to the t rust :

• the t rust was a res ident in Quebec and had income f rom a business wi th a permanent establ ishment outs ide Quebec

• the t rust res ided outs ide Quebec and had income f rom a business wi th a permanent establ ishment in Quebec

Enter the resul t on l ine 34 of Schedule 11.

Schedule 11A – Donations and gi f ts tax credit calculat ion Use Schedule 11A to calculate the tota l donat ions and gi f ts tax credi t .

Testamentary trust

Estate donations – for deaths that occur after 2015

For deaths that occur af ter 2015, donat ions made by wi l l and designat ion donat ions are no longer deemed to be made by an indiv idual immediate ly before the indiv idual 's death. Instead, these

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donat ions are deemed to be made by the indiv idual 's estate and where cer ta in condi t ions are met, these donat ions are deemed to be made by the indiv idual 's graduated rate estate (GRE). See GRE donat ions on page 301 [below].

An estate can claim the donat ions and gif ts tax credit in respect of a donat ion that is not a GRE donat ion or former GRE donat ion in the year in which the donat ion is made or in any of the f ive fol lowing years (or ten years for a gift of ecologically sensit ive land made after February 14, 2014). However, the donation cannot be al located to a tax year of the indiv idual or an ear l ier year of the estate.

For more informat ion about estate donat ions for deaths that occur af ter 2015, go to canada.ca/en/revenue-agency/programs/ about-canada-revenue-agency-cra/federal-government-budgets/ budget-2014-road-balance-creating- jobs-opportunit ies/estate-donations-deaths-after-2015 .

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GRE donations

GRE donat ions are donat ions by a GRE to a qual i f ied donee. The donated property must be property that was acquired by the estate on and as a consequence of the death (or property that was subst i tuted for such property) . GRE donat ions a lso inc lude designat ion donat ions.

You can al locate a GRE donat ion among any of : • the tax year of the GRE in which the donat ion is made

• an ear l ier tax year of the GRE

• the last two tax years of the deceased indiv idual ( the f inal re turn and the return for the preceding year)

In addi t ion, for 2016 and future tax years, a g i f t made af ter the 36 month per iod but wi th in 60 months af ter the date of death by a former GRE that cont inues to meet a l l o f the requirements of a GRE except for the 36 month t ime l imi t , can be a l located among any of :

• the tax year of the estate in which the donat ion is made

• the last two tax years of the deceased indiv idual ( the f inal re turn and the return for the preceding year)

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For more informat ion about estate donat ions by former GREs, go to canada.ca/en/revenue-agency/programs/about-canada-revenue- agency-cra/federal-government-budgets/budget-2016-growing-middle-class/estate-donations-former-graduated-rate-estates .

I f the donat ion is not a one-t ime payment ( for example, a donat ion that wi l l cont inue to be made accord ing to the terms of the wi l l ) , t reat the rec ip ient as an income benef ic iary and deduct the donat ion as an a l locat ion of t rust income on l ine 47 of the return. You a lso have to inc lude the donat ion on the appropr iate l ine of Schedule 9.

Estate Donations – for deaths that occur before 2016

For deaths that occur before 2016, donat ions made by wi l l and designat ion donat ions are deemed to have been made by the deceased indiv idual immediate ly before death. I f the donat ion is a one-t ime payment provided for in the deceased person's wi l l , do not c la im i t on the T3 return. Cla im the donat ion on the deceased person's T1 return, e i ther in the year of death or in the year before the year of death, or c la im part of the donat ion on each return.

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I f the wi l l provides that a donat ion can be made at the d iscret ion of the t rustee, you can do the fo l lowing:

• choose to t reat the rec ip ient as an income benef ic iary and deduct the amount on l ine 47 of the return

• complete Schedule 11A and c la im a donat ions and g i f ts tax credi t on l ine 16 of Schedule 11

Inter vivos trust

I f the rec ip ient is an income benef ic iary according to the terms of the t rust agreement, deduct the donat ion on l ine 47 of the return, and inc lude i t on the appropr iate l ine of Schedule 9.

Note In l imi ted s i tuat ions, a d is t r ibut ion by an inter v ivos t rust to a registered char i ty may instead qual i fy for a donat ions and g i f ts tax credi t on l ine 16 of Schedule 11; for example, where an a l ter ego t rust makes a d is t r ibut ion to a registered char i ty fo l lowing the death of the set t lor of the t rust , and the t rustee had discret ion under the terms of the t rust indenture to d is t r ibute the property e i ther to the qual i f ied donee or to someone else.

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I f the t rust donates an obl igat ion of the t rust or of a re lated person, a share issued by a corporat ion re lated to the t rust , or any other secur i ty issued by a person re lated to the t rust , ca l l 1-800-959-8281 .

A communal organizat ion that made char i table donat ions can choose not to c la im them and can e lect to designate the donat ions to benef ic iar ies. For more informat ion, see Informat ion Circular IC78-5, Communal Organizat ions.

Lines 1 to 3 – Donat ions to registered char i t ies and other qual i f ied donees

These l ines inc lude the e l ig ib le amount of a l l donat ions made to registered char i t ies and other qual i f ied donees in 2018 plus donat ions and g i f ts made in any of the previous f ive years that have not been c la imed before. For a l is t of qual i f ied donees, see Pamphlet P113, Gi f ts and Income Tax.

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Line 4 – Donat ions appl ied to the last two years of the deceased indiv idual (GREs and former GREs only)

Use this l ine to indicate the amount of previously unclaimed donations that you are current ly applying to the last two tax years of the deceased indiv idual ( the f inal return and the return for the preceding year).

Line 5 – Total e l ig ib le amount of char i table donat ions ( tota l of l ines 1, 2, and 3 minus l ine 4)

This is the e l ig ib le amount of a l l donat ions made af ter 2011, which has not been c la imed in any previous year and is not inc luded on l ine 12.

The el ig ib le amount is the amount by which the fa i r market va lue of your g i f t exceeds any advantage in respect of the g i f t . There may be s i tuat ions where the e l ig ib le amount may be deemed to be n i l or the fa i r market value may be deemed to be less than the actual fa i r market value of the property. For more informat ion, see Pamphlet P113, Gi f ts and Income Tax.

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Line 6 – Donat ions l imi t For donat ions of cash or other property to a registered char i ty or other qual i f ied donee in the tax year, a t rust 's tota l donat ions l imi t wi l l general ly be 75% of i ts net income for the year.

Lines 7 and 8 – Gif ts of capi ta l property ( inc luding depreciable property) A trust can increase i ts tota l donat ions l imi t i f i t donates capi ta l property in the year. For more in format ion and how to calculate the amount to be entered on l ines 7 and 8, see Pamphlet P113, Gif ts and Income Tax.

Line 11 – El ig ib le amount of cul tura l and ecolog ical g i f ts Unl ike other donat ions, your tota l e l ig ib le amount c la imed for these types of g i f ts is not l imi ted to a percentage of net income. You can choose the par t you c la im in 2018 and carry forward any unused par t for up to f ive years.

For donat ions of ecological ly sensi t ive lands made af ter February 10, 2014, the carry- forward per iod is up to ten years.

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A g i f t o f ecological ly sensi t ive lands cannot be made to a pr ivate foundat ion af ter March 21, 2017.

For donat ions of cer t i f ied cul tura l property made af ter February 10, 2014, specia l ru les apply when the property was acquired through a g i f t ing arrangement that is a tax shel ter .

For more informat ion about these g i f ts and the amounts you can c la im, see Pamphlet P113, Gif ts and Income Tax.

Line 12 – Amount of cul tura l and ecologica l g i f ts appl ied to the last two years of the deceased indiv idual (GREs and former GREs only)

Use th is l ine to indicate the amount of previously uncla imed cul tura l and ecolog ical g i f ts that you are current ly apply ing to the last two tax years of the deceased indiv idual ( the f inal return and the return for the preceding year) .

Lines 15 to 31 – Donat ions and g i f ts tax credi t ca lculat ion For donations made in 2018, the tax credit rate is 33%. The calculat ion rate of 33% appl ies to the el igible amount of gi f ts greater than $200.

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For a graduated rate estate (GRE) and a qual i f ied disabi l i ty t rust (QDT), the tax credi t rate of 33% appl ies to the el igible amount of gi f ts greater than $200 to the extent that a GRE and QDT has taxable income in excess of $205,842 for the tax year.

For donat ions made before 2015, the previous tax credi t rate of 29% wi l l cont inue to apply to the e l ig ib le amount of g i f ts greater than $200. This appl ies to a l l t rusts; GRE, QDT or otherwise.

Schedule 12 – Minimum Tax I f the t rust is subject to a min imum tax, i t may have to pay minimum tax in the year. The fo l lowing types of t rusts are not subject to minimum tax and do not need to complete Schedule 12:

• A spousal or common- law partner t rust , a jo int spousal or common-law partner t rust , or an a l ter ego t rust i f i t reports in the year i ts f i rs t deemed disposi t ion on Form T1055, Summary of Deemed Disposi t ions (2002 and la ter tax years) .

• I f the t rust was one of the fo l lowing throughout the tax year : – a mutual fund t rust

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– a re lated segregated fund t rust – a master t rust – an employee l i fe and heal th t rust

Min imum tax l imi ts the tax advantage a t rust can receive in a year f rom certa in incent ives. The most common s i tuat ions that may make a t rust l iab le to minimum tax are i f i t :

• reports taxable capi ta l gains ( l ine 01 of the return)

• reports taxable d iv idends ( l ine 03 of the return)

• c la ims a loss resul t ing f rom, or increased by, resource expendi tures, or c la ims resource and deplet ion a l lowances on resource propert ies ( l ine 06 or l ine 19 of the return

• c la ims a loss resul t ing f rom, or increased by, capi ta l cost al lowance (CCA) or carry ing charges c la imed on a renta l or leasing proper ty ( l ine 09 of the return) , or cer t i f ied f i lms or v ideotapes ( l ine 06 of the return)

• has cer ta in losses that l imi ted par tners, speci f ied members of a par tnership, or par tners of a registered tax shel ter deduct for thei r

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par tnership in terest ( for th is purpose, losses a l located f rom a partnership are appl ied against gains f rom the same partnership source)

Note For tax years ending af ter December 31, 2011, a t rust 's l imited par tnership loss is restr ic ted only i f the t rust 's interest in the par tnership is a registered tax shel ter . This t reatment may a lso apply to the t rust 's 2006 to 2011 tax years, where the t rust f i led an e lect ion by March 11, 2014.

• has losses f rom an investment in a registered tax shel ter

• has carry ing charges for in terests in l imi ted par tnerships, tax shel ters, renta l or leasing proper t ies, or f i lm or resource propert ies, that increase or create a loss f rom these sources

Note Net income f rom renta l , leasing, and f i lm property inc ludes income f rom these investments (before CCA and re lated carrying charges) p lus any net taxable capi ta l gains f rom the d isposi t ion of these investments minus any losses f rom these investments (before CCA

– 312 –

and re lated carrying charges) . You also have to subtract a l located par tnership losses f rom gains f rom the same partnership source.

The t rust has to pay minimum tax i f i t is more than the federal tax calculated in the usual manner.

Alternative Minimum Tax

For 2016 and subsequent tax years, the $40,000 basic exempt ion is appl icable to graduated rate estate only.

▲ Provincial and territorial income tax

Resident trusts

A trust is l iable for provincial or terr i tor ial tax at the rate that appl ies for the province or terr i tory of res idence i f i t was a resident of a province or terr i tory on the last day of i ts tax year. Use the appl icable provincial or terr i tor ial tax form to calculate the provincial or terr i tor ial tax.

– 313 –

I f the t rust was res ident in the province of Quebec on the last day of i ts tax year, see the note in the sect ion cal led "Which tax package should you use?" on page 16 [5] .

A res ident t rust may carry on a business wi th a permanent establ ishment in one of the fo l lowing:

• a province or terr i tory other than the province or terr i tory of res idence

• a fore ign country

In these cases, you have to calculate the t rust 's income f rom each source to determine the l iab i l i t y for one of the fo l lowing:

• provinc ia l or terr i tor ia l income tax

• federal sur tax for income not subject to provinc ia l or terr i tor ia l tax

Report income f rom a business for each province, terr i tory, or fore ign country in which the business had a permanent establ ishment dur ing the tax year . At tach a copy of th is l is t to the return. In general , you should a l locate a l l o ther income to the province or terr i tory of

– 314 –

res idence. Use Form T3MJ, T3 Provincia l and Terr i tor ia l Taxes for 2018 – Mul t ip le Jur isdict ions, to report th is income. To get th is form, go to canada.ca/cra-forms , or ca l l 1-800-959-8281 .

A trust res ident in a province other than Quebec, or in a terr i tory, on the last day of i ts tax year may have a federal fore ign tax credi t that is less than the non-business income tax the t rust paid to a fore ign country. I f th is is the case, the t rust can apply the excess of fore ign non-business income tax paid against provinc ia l and terr i tor ia l tax.

For more informat ion, see "L ine 23 – Federal fore ign tax credi t " on page 291 [55] .

Non-resident trusts and deemed resident trusts

A non-resident trust or a deemed resident trust that carr ies on a business with a permanent establ ishment in a province or terr i tory is subject to provinc ia l or terr i tor ia l tax on the business income i t earned in that prov ince or terr i tory.

A non-resident t rust or a deemed res ident t rust may carry on a business in Canada wi thout a permanent establ ishment in Canada.

– 315 –

In th is case, i t may be subject to the federal sur tax. For more informat ion, see "L ine 21 – Surtax on income not subject to provincia l or terr i tor ia l tax" on page 290 [55] .

Chapter 4 – T3 slip and summary As t rustee, you have to complete a T3 s l ip , Statement of Trust Income Al locat ions and Designat ions, for each resident benef ic iary, inc luding a preferred benef ic iary, to whom the t rust a l located income in the year. You must a lso do th is for a t rust that made any d is t r ibut ions of capi ta l that would resul t in an adjustment to the adjusted cost base of the benef ic iary's in terest in the t rust . I f you a l located income to a non-resident benef ic iary, see "Column 2 – Non-resident , " on page 255 [48] .

This chapter provides informat ion on how to complete the T3 s l ip. The T3 s l ip has three indiv idual s l ips pr inted on each sheet . These are intended to be used for laser or ink je t pr inters, for typ ing, or to be completed by hand.

– 316 –

The T3 s l ip shows only the h igh-use boxes (boxes 12, 14, 16, 18, 21, 23, 26, 30, 32, 39, 49, 50, and 51). There are also s ix gener ic boxes wi th b lank codes for less common amounts. I f you have to use a gener ic box, enter the box number and the amount in the other in format ion area.

I f you need more than s ix boxes for the same benef ic iary, use an addi t ional T3 s l ip .

You can f ind a sample of the s l ip on page 347 [66] .

You do not have to complete a T3 s l ip for a benef ic iary i f the income al located in the year to that benef ic iary is less than $100. However, you have to not i fy the benef ic iary of the a l located income s ince i t s t i l l has to be reported on the benef ic iary's return.

You have to complete a T3 Summary, Summary of Trust Income Al locat ions and Designat ions, even i f you only prepare one T3 s l ip . This is the form you use to record the tota l of the more common amounts you reported on a l l re lated s l ips. F i le only one summary for the t rust , unless i t is a mutual fund t rust .

– 317 –

See the back of the T3 Summary for in format ion on how to complete i t . You can f ind a sample of the form star t ing on pages 347 [66] .

▲ How to fi le the T3 slip and summary

Electronic f i l ing methods

You must f i le by Internet i f you f i le more than 50 trust-related information returns (sl ips) for a calendar year.

Fil ing by Web Forms

Our Web Forms appl icat ion is f ree and secure. To use i t , a l l you need is access to the Internet . Wi th Web Forms you can complete a t rust -re lated informat ion return easi ly, fo l lowing the step-by-step instruct ions.

Web Forms lets you:

• f i le up to 100 sl ips (or ig inal , addi t ional , amended, or cancel led) f rom our websi te

• ca lculate a l l o f the tota ls for the summary

– 318 –

• create a d ig i ta l t rust- re lated informat ion return conta in ing s l ips and summary, which can be saved and imported at a la ter date

• pr int a l l your s l ips and your summary

• va l idate data in real t ime

Af ter you submit your t rust - re lated informat ion return, you wi l l receive a conf i rmat ion number that wi l l be your proof that we received i t .

To use the Web Forms appl icat ion, you must have a web access code. I f you do not have a web access code, you can easi ly get one onl ine or by cal l ing us. For more informat ion, see "Web access code" on page 318 [ th is page] .

To star t us ing th is appl icat ion or to get more informat ion about Web Forms, go to canada.ca/taxes-iref .

Fil ing by Internet f i le transfer

In ternet f i le t ransfer a l lows you to t ransmit an or ig inal or amended T3 return wi th a maximum f i le s ize of 150 MB . A l l you need is a web browser to connect to the Internet , and your sof tware wi l l create, pr in t ,

– 319 –

and save your d ig i ta l t rust- re lated informat ion return in XML format. For in format ion about th is f i l ing method, contact your sof tware publ isher or go to canada.ca/taxes-iref .

Web access code

To f i le your return over the Internet us ing the Internet f i le t ransfer or Web Forms serv ice, you wi l l need a web access code (WAC). I f you have misplaced or do not have a WAC, go to canada.ca/taxes-iref to access our web access code onl ine serv ice. I f you cannot get your WAC onl ine or would l ike to change i t , ca l l the Business Enquir ies l ine at 1-800-959-5525 .

Fil ing on paper

I f you f i le 1 to 50 s l ips, we st rongly encourage you to f i le over the Internet us ing Internet f i le t ransfer or Web Forms. However, you can st i l l f i le up to 50 s l ips on paper.

I f you need more paper copies, you can order a maximum of 9 single-page sl ips at canada.ca/cra-forms or by cal l ing 1-800-959-5525 .

– 320 –

I f you choose to f i le your return on paper, mai l i t to the fo l lowing address:

Jonquière Taxation Centre T3 Program PO Box LCD 1300 Jonquière QC G7S 0L5

Complete one copy o f the t rust- re lated informat ion s l ip for each recip ient and send them wi th your T3 Summary. Enter the informat ion for two d i f ferent rec ip ients on one sheet . This wi l l le t us process your in format ion return faster . You must keep a copy of the t rust- re lated s l ips and the T3 Summary for your f i les.

Fil ing using computer-printed (customized) forms

For those who f i l l out a large number of T3 s l ips, we accept cer ta in sl ips other than our own. For help on how to f i l l out the sl ips accurately, consul t the guidel ines for the product ion of customized forms at canada.ca/cra-customized-forms or see the current version of Information Circular IC97-2, Customized Forms.

– 321 –

I f you are a mutual fund t rust that f i les T3 s l ips by Internet , you can combine the income and capi ta l gains f rom several funds onto one T3 s l ip for each uni t holder . However , when you combine the s l ips, you have to do a l l o f the fo l lowing:

• submit a sample of the combined in format ion s l ip request ing an approval number

Notes Send your d ig i ta l submission in e i ther * .pdf or * . jpg format to customized-hors-series@cra.gc.ca .

Send your paper submission to the fo l lowing address:

Individual Returns Directorate In format ion Returns Fi lers Serv ices Sect ion 750 Heron Road, 7th f loor Ot tawa ON K1A 0L5

• prepare the Internet submission of summary forms and s l ips, which you submit to us at the indiv idual fund level

– 322 –

• wr i te "Combined informat ion s l ip" c lear ly on the T3 s l ip under the rec ip ient name and address, and provide the uni t holders wi th statements that a l low them to reconci le the amounts reported on the combined in format ion s l ips

• mainta in an audi t t ra i l so the combined informat ion s l ips can be ver i f ied i f we audi t these funds later

▲ Distributing the T3 slip Send us the T3 s l ip a long wi th the T3 Summary no later than 90 days af ter the end of the t rust 's tax year.

Do not s taple the summary and s l ips to the T3 return.

Send two copies of the T3 s l ip to the benef ic iary. You do not have to keep a copy of the T3 s l ips. However, when you f i le onl ine, you have to keep the informat ion f rom which you prepared the s l ips in an accessib le and readable format.

You can provide rec ip ients wi th a d ig i ta l copy of thei r T3 s l ips only i f the rec ip ient g ives you thei r consent in wr i t ing or by emai l .

– 323 –

I f you fai l to distr ibute the T3 sl ip or any other trust-related information s l ip to a rec ip ient by the due date, you wi l l be l iable to a penal ty. For more informat ion, see "Penal t ies and interest" on page 94 [19] .

Amending, cancel l ing, adding, or replacing T3 sl ips After f i l ing your t rust -re lated informat ion s l ip , you may not ice an error on a t rust -re lated s l ip . I f so, you wi l l have to prepare an amended s l ip to correct the in format ion. Provide copies to the rec ip ient . Do not inc lude s l ips that have no changes.

I f you prepare and issue an amended T3 s l ip af ter you have f i led the or ig inal s l ip wi th us, you may have to f i le an amended T3 Summary. I f there is a change to the amounts in the boxes shown on the f ront of the summary, f i le an amended T3 Summary. I f the amended T3 s l ip affects the amounts shown on the T3 Trust Income Tax and informat ion Return, or on Schedule 9, Income Al locat ions and Designat ions to Beneficiar ies, do not f i le another T3 return. Instead, send us a completed Form T3-ADJ, T3 Adjustment Request, or a letter providing the detai ls of the change. Indicate the tax year you want us to change and at tach any support ing documents. Inc lude the t rust 's account number on the let ter .

– 324 –

Amending or cancel l ing sl ips over the Internet To amend a s l ip over the Internet , change only the informat ion that is incorrect and reta in a l l o f the remaining informat ion that was or ig inal ly submit ted. Use summary repor t type code "A" and s l ip repor t type code "A."

To cancel a s l ip , do not change any informat ion that was contained on the or ig inal s l ip . Use summary repor t type code "A" and s l ip repor t type code "C."

For more informat ion about amending or cancel l ing t rust- re lated informat ion s l ips us ing the Internet , go to canada.ca/taxes-iref .

Amending or cancell ing sl ips on paper I f you choose to f i le your amended return on paper, c lear ly ident i fy the s l ips as amended or cancel led by wr i t ing "AMENDED" or "CANCELLED" at the top of each s l ip. Make sure you f i l l in a l l the necessary boxes, inc lud ing the informat ion that was correct on the or ig inal s l ip . Send two copies of the s l ips to the rec ip ient . Send one copy of the amended/cancel led s l ips to us wi th a let ter expla in ing the reason for the amendment/cancel la t ion.

– 325 –

Note I f you not ice errors on the t rust- re lated s l ips before you f i le them wi th us, you can correct them by prepar ing new informat ion s l ips and removing any incorrect copies f rom the return. I f you do not prepare a new s l ip , in i t ia l any changes you make on the s l ip . Be sure to a lso correct the T3 Summary.

Adding sl ips After you f i le your t rust -re lated in format ion return, you may discover that you need to send us addi t ional t rust - re lated s l ips. I f you have or ig inal s l ips that were not f i led wi th your in format ion return, f i le them separate ly e i ther onl ine or on paper.

To f i le addi t ional s l ips onl ine, see "Electronic f i l ing methods" on page 317 [60] .

I f you f i le addi t ional s l ips on paper, c lear ly ident i fy the new s l ips by wr i t ing "ADDITIONAL" at the top of each s l ip . Send one copy of the addi t ional s l ips to any tax cent re. See "Electronic f i l ing methods" on page 317 [60] for more informat ion on adding s l ips over the Internet or go to canada.ca/taxes-iref .

– 326 –

Notes I f the tota l number of t rust - re lated s l ips ( inc luding any addi t ional s l ips) you f i le is more than 50 for the same calendar year, you have to f i le the addi t ional s l ips over the Internet . Any addi t ional t rust- re lated s l ips that are f i led af ter the due date may resul t in a penal ty. For more informat ion, see "Penal ty for fa i lure to f i le an informat ion return by the due date" at canada.ca/penalty- information-returns .

▲ Recipient identif ication number The recip ient ident i f icat ion number is one of the fo l lowing:

• the socia l insurance number (SIN) i f the benef ic iary is an indiv idual (other than a t rust)

• the business program account i f the benef ic iary is a corporat ion or a par tnership

• the t rust account number i f the benef ic iary is a t rust

This sect ion expla ins the spec ia l ru les and penal t ies that apply to us ing SIN, business program account and the t rust account number.

– 327 –

Trustee – Anyone who prepares an informat ion s l ip has to make a reasonable ef for t to get the SIN, business program account , or t rust account number f rom the person or par tnership who wi l l receive the s l ip . Unless you make a reasonable ef for t to get th is in format ion, you wi l l be l iable to a $100 penal ty each t ime you do not provide the SIN, business program account , or t rust account number on the informat ion s l ip . This penal ty does not apply i f the person or par tnership has appl ied for but has not yet received a SIN, a business program account , or t rust account number when they f i le thei r return.

Beneficiary – Persons or par tnerships have to g ive thei r SIN, business program account , or t rust account number on request to anyone who has to prepare an informat ion s l ip for them.

I f the person or par tnership does not have a SIN, business program account , or t rust account number , both of the fol lowing ru les apply:

• the person or par tnership must apply for the number wi th in 15 days of your request ( the SIN f rom any Serv ice Canada Centre, the business program account and t rust account number f rom CRA)

• once the person or par tnership receives the number, they have 15 days to g ive i t to you

– 328 –

Persons or par tnerships who, for any reason, do not comply wi th these requirements are l iable to a penal ty of $100 for each fa i lure to g ive thei r SIN, business program account , or t rust account number.

A benef ic iary may have appl ied for but has not yet received a SIN, a business program account , or a t rust account number, or the benef ic iary may refuse to g ive you the number. In these cases, do not delay f i l l ing out the in format ion s l ip beyond the f i l ing due date. I f you have not received the SIN, business program account , or t rust account number by the t ime you prepare the T3 s l ip , enter "n i l " in box 12.

I f you have to prepare an informat ion s l ip , you, your employees, your of f icers, or your agents cannot knowingly use, share, or a l low a SIN, business program account or t rust account number to be shared wi thout the person's or par tnership 's wr i t ten consent , unless required or author ized by law. Any person who does so is gui l ty of an of fence and, i f convic ted, may have to pay a f ine or go to ja i l , or both.

For more informat ion, see Informat ion Circular IC82-2, Socia l Insurance Number Legis lat ion That Relates to the Preparat ion of Informat ion Sl ips.

– 329 –

▲ How to complete the T3 slip

Type or pr int the in format ion on the s l ip . Report al l amounts in Canadian dollars . I f the amount was paid at var ious t imes throughout the year, to get the appl icable rate, go to bankofcanada.ca/rates/ exchange or cal l 1-800-959-8281 .

I f there is a preferred benef ic iary e lect ion and other income is a lso a l located to the same benef ic iary, complete one T3 s l ip for the e lected income and a separate s l ip for a l l o ther a l located income.

You can get the informat ion needed to complete boxes 21 to 51 f rom Schedule 9, Income Al locat ions and Designat ions to Benef ic iar ies.

Recipient 's name and address – Enter the informat ion in the whi te area provided. I f the payment is to an individual, enter the benef ic iary's name. I f the payment is to a joint benef ic iary, enter both names. I f the payment is made to a t rust , enter the name of the t rust and not the names of the indiv idual benef ic iar ies of that t rust . I f the payment is made to an associat ion, organizat ion, or inst i tu t ion, enter that name. Fol lowing the benef ic iary's name, enter the benef ic iary's fu l l address inc luding c i ty and province or terr i tory. Also inc lude the posta l code.

– 330 –

Year – Enter the appl icable tax year at the top of the s l ip .

Trust year-end – Use a four-d ig i t number to indicate the year, and a two-dig i t number to indicate the month of the t rust 's tax year-end.

Note For your convenience, we have put the inst ruct ions for the fo l lowing boxes in numer ic order , even though the order on the s l ip may be d i f ferent . The h igh-use boxes appear f i rs t , fo l lowed by the gener ic boxes.

▲ Box 12 – Recip ient ident i f icat ion number

You have to enter the benef ic iary's socia l insurance number, business program account , or t rust account number. I f you do not have the number, see the sect ion t i t led "Recip ient ident i f icat ion number" on page 326 [62] . Do not leave th is box b lank.

– 331 –

Box 14 – Account number

You have to enter the t rust 's account number, i f we have assigned one. Do not leave th is box b lank. For secur i ty purposes, do not inc lude the t rust account number on the copies you provide to the benef ic iary.

1 a lpha, 8 numer ic :

• T3 s l ip , box 14, example: T00000000

• t rust account number assigned by the CRA

• must correspond to the "Trust account number" on the re lated T3 Summary record

• i f you have not been assigned such a number, enter T00000000 in the f ie ld

– 332 –

▲ Box 16 – Report code

Enter one of the fo l lowing codes:

Code Type of sl ip

1 alpha

O Or ig inals

A Amendments

C Cancel

Note An amended return cannot conta in an or ig inal T3 s l ip .

I f you use code A or C, see "Amending, cancel l ing, adding, or replac ing T3 s l ips" on page 323 [61] for more informat ion.

– 333 –

▲ Box 18 – Benef ic iary code

You have to enter one of the fo l lowing codes to ident i fy the type of benef ic iary (do not leave th is box b lank) :

Code Type of beneficiary

1 numer ic

1 i f the benef ic iary is an indiv idual

2 i f the benef ic iary is a jo int benef ic iary

3 i f the benef ic iary is a corporat ion

4 i f the benef ic iary is an associat ion, a t rust ( f iduciary, t rustee, nominee, or estate), a c lub, or a par tnership

5 i f the benef ic iary is a government, a government enterpr ise, an internat ional organizat ion, a char i ty, a non-prof i t organizat ion or other tax-exempt ent i ty, or a deferred income plan that is exempt f rom tax

– 334 –

Note In some cases, you may have to enter in format ion in the footnote area below box 26 on the T3 s l ip. I f you need more room to inc lude an explanat ion in th is area, prepare a separate statement and at tach a copy to each copy of the s l ip .

Box 21 – Capi ta l gains

Enter the resul t o f the benef ic iary's share of the amount f rom l ine 921 of Schedule 9, mul t ip l ied by 2.

Note I f box 21 inc ludes capi ta l gains f rom fore ign property, enter an aster isk (* ) beside the amount in box 21. In the footnote area, ident i fy each country, enter "non-business income for fore ign tax credi t " and the taxable por t ion of the amount inc luded in box 21 that re lates to the d isposi t ion of fore ign property.

For more informat ion, see "L ine 921 – Taxable capi ta l gains" on page 257 [49] .

– 335 –

▲ Box 23 – Actual amount of d iv idends other than el ig ib le d iv idends

Enter the benef ic iary's share of the amount f rom l ine 923 of Schedule 9.

I f the benef ic iary is an indiv idua l or a t rust (other than a registered char i ty) , see box 32 and box 39 for more inst ruct ions.

▲ Box 26 – Other income

Enter the benef ic iary's share of the amount f rom l ine 926 of Schedule 9. Inc lude amounts such as the fo l lowing in th is box:

• death benef i ts

• ret i r ing a l lowances

• pension income other than lump-sum pension benef i ts a l ready inc luded in box 22

• net renta l income

• net business, farming, and f ish ing income

• in terest income

– 336 –

Notes Enter an aster isk (* ) beside the amount in box 26 i f i t inc ludes business, farming, or f ish ing income f rom a communal organizat ion. In the footnote area, enter "sel f -employment earnings for CPP purposes," and indicate the type of income–business, farming, or f ish ing–and the amount of the benef ic iary's share.

Enter an aster isk (* ) beside the amount in box 26 i f i t inc ludes any net renta l income f rom real or immovable renta l property t ransferred to the t rust . In the footnote area, enter "Net renta l income" inc luded in "earned income" - ITA 75(2) , and indicate the amount of the benef ic iary's share.

No other footnotes are required for box 26.

Box 30 – Capi ta l gains e l ig ib le for deduct ion

Only personal t rusts complete box 30.

Mul t ip ly the benef ic iary's share by 2, and enter the resul t on l ine 930 of Schedule 9.

– 337 –

Note Enter an aster isk (* ) beside the amount in box 30. In the footnote area, enter e i ther "qual i f ied farm or f ish ing property" , or "qual i f ied smal l business corporat ion shares," whichever appl ies.

For more informat ion, see "L ine 930 – Taxable capi ta l gains e l ig ib le for deduct ion" on page 263 [50] .

▲ Box 32 – Taxable amount of div idends other than el igible div idends

I f the benef ic iary is an indiv idua l or a t rust (other than a registered char i ty) , enter the resul t o f the amount of d iv idends other than el ig ib le d iv idends f rom taxable Canadian corporat ions reported in box 23, mul t ip l ied by 1.16.

Do not include negat ive amounts when complet ing box 32 of the T3 sl ip.

▲ Box 39 – Div idend tax credi t for d iv idends other than e l ig ib le d iv idends

I f the benef ic iary is an indiv idua l or a t rust (other than a registered char i ty) , enter 10.0313% of the amount in box 32.

– 338 –

▲ Box 49 – Actual amount of e l ig ib le d iv idends

Enter the benef ic iary's share of the amount f rom l ine 949 of Schedule 9.

▲ Box 50 – Taxable amount of e l ig ib le d iv idends

I f the benef ic iary is an indiv idua l or a t rust (other than a registered char i ty) , enter the resul t o f the amount of e l ig ib le d iv idends f rom taxable Canadian corporat ions reported in box 49, mul t ip l ied by 1.38.

▲ Box 51 – Div idend tax credi t for e l ig ib le d iv idends

I f the benef ic iary is an indiv idua l or a t rust (other than a registered char i ty) , enter 15.0198% of the amount in box 50.

"Other information" area

This area on the T3 s l ip has boxes for you to enter codes and amounts for less common amounts, such as fore ign business income, e l ig ib le death benef i ts , investment tax credi ts , and others.

– 339 –

The boxes are not pre-numbered as in the top par t of the s l ip. Therefore, enter the codes that apply to the benef ic iary.

I f more than six codes apply to the same beneficiary, use an addit ional T3 s l ip . Do not repeat al l the data on the addi t ional s l ip . Enter only the benef ic iary's ident i f icat ion number and name, as wel l as the t rust 's name and account number, and complete the required boxes in the "Other in format ion" area.

Al though the CRA's posi t ion at th is t ime is that we wi l l not require the breakdown by country on the T3 s l ip , nor require the f i l ing of mul t ip le T3 s l ips, i t is your obl igat ion and responsib i l i t y to provide us wi th such informat ion on request . Your records have to provide enough deta i ls to ident i fy each fore ign country and the amount of business income, in Canadian dol lars, f rom each country.

▲ Box 22 – Lump-sum pension income

Enter the benef ic iary spouse's or common- law partner 's share of the amount f rom l ine 922 of Schedule 9.

– 340 –

Box 24 – Foreign business income

Enter the benef iciary's share of the amount from l ine 924 of Schedule 9 (before wi thhold ing taxes) .

Box 25 – Foreign non-business income

Enter the benef iciary's share of the amount from l ine 925 of Schedule 9 (before withholding taxes) .

▲ Box 31 – Qual i fy ing pension income

Enter the benef iciary spouse's or common-law partner 's share of the amount from l ine 931 of Schedule 9. This amount is included in box 26.

Box 33 – Foreign business income tax paid

Enter the benef iciary's share of the amount from l ine 933 of Schedule 9.

Box 34 – Foreign non-business income tax paid

Enter the benef iciary's share of the amount from l ine 934 of Schedule 9.

– 341 –

▲ Box 35 – El ig ib le death benef i ts

Enter the benef ic iary's share of the amount f rom l ine 935 of Schedule 9. This amount is inc luded in box 26.

For more informat ion, see "L ine 935 – El ig ib le death benef i ts" on page 265 [50] .

Box 37 – Insurance segregated fund net capi ta l losses

Enter the resul t o f the benef ic iary's share of the amount f rom l ine 937 of Schedule 9, mul t ip l ied by 2.

Box 38 – Par t XI I .2 tax credi t

Enter the benef ic iary's share of the amount f rom l ine 938 of Schedule 9.

For more informat ion, see "Schedule 10 – Part XI I .2 Tax and Par t XI I I Non-Resident Withhold ing Tax" on page 271 [51] .

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Boxes 40, 41 and 43 – Investment tax credi t

Ef fect ive for 2016 and subsequent years, only a graduated rate estate or a communal organizat ion that is deemed to be an inter v ivos t rust can complete boxes 40, 41 and 43.

For each type of property or expendi ture made by the t rust in the year that is e l ig ib le for the investment tax credi ts ( ITC), prepare a separate T3 s l ip for each designat ion to benef ic iar ies.

Box 40 – Investment cost or expendi tures

Enter the benef ic iary's share of the amount f rom l ine 940 of Schedule 9.

Box 41 – Investment tax credi t

Enter the benef iciary's share of the amount from l ine 941 of Schedule 9.

For more informat ion, see "L ines 940 and 941 – Investment tax credi t ( ITC)" on page 267 [51] .

– 343 –

Box 42 – Amount resul t ing in cost base adjustment

Enter the benef ic iary's share of the amount f rom l ine 942 of Schedule 9. I f th is is a negat ive amount , put i t in brackets.

Note Enter an aster isk (* ) beside any amount entered in box 42. In the footnote area, indicate whether the amount should be added to the adjusted cost base (ACB) of the property ( for a negat ive amount) , or subtracted f rom the ACB ( for a posi t ive amount) .

Do not inc lude new uni ts issued to a benef ic iary in sat is fact ion of a d is t r ibut ion of income. Instead, advise the benef ic iary that you have issued these uni ts , as wel l as the number of uni ts and thei r value.

Box 43 – Investment tax credi t – Code number

Enter the appl icable investment tax credi t code number (4B, 12, 6 or 7) and provide a statement to each benef ic iary wi th the fo l lowing descr ipt ion, as appl icable, of the code number:

• Code 4B – Qual i f ied expendi tures for sc ient i f ic research and exper imenta l development (SR&ED)

– 344 –

– Enter the Box 41 amount on l ine 6712 of Form T2038(IND), Investment Tax Credi t ( Indiv iduals) .

• Code 12 – Qual i f ied property, or qual i f ied resource property acquired af ter 2013 and before 2017 that is e l ig ib le for the t ransi t ional re l ie f rate

– Enter the Box 41 amount on l ine 6714 of Form T2038(IND).

For more informat ion, go to canada.ca/en/revenue-agency/services/ tax/ individuals/topics/about-your-tax-return/tax-return/complet ing-a-tax-return/deductions-credits-expenses/ l ine-412-investment-tax-credit /at lantic- investment-tax-credit .

• Code 12 – Qual i f ied resource property acquired in 2015 that is not e l ig ib le for the t ransi t ional re l ie f rate

– Enter the Box 41 amount on l ine 6723 of the 2015 vers ion of Form T2038(IND) and f i le i t wi th your 2016 return.

• Code 6 – Apprent iceship job creat ion tax credi t

– Enter the Box 41 amount on the appropr iate l ine of Part B of Form T2038(IND).

– 345 –

• Code 7 – Chi ld care spaces expendi tures

– Enter the Box 41 amount on the appropr iate l ine of Part B of Form T2038(IND).

– For expendi tures incurred af ter March 21, 2017, th is credi t is not avai lable. However, t ransi t ional re l ie f is avai lable in respect of e l ig ib le expendi tures incurred before 2020 under a wr i t ten agreement entered into before March 22, 2017, and af ter March 18, 2007, to a maximum ITC amount of $10,000 per chi ld care space created.

For 2016 and subsequent tax years, testamentary t rusts (other than a graduated rate estate) wi l l no longer be able to designate the ITC to thei r benef ic iar ies.

Box 45 – Other credi ts

Research and development tax credit

Enter the benef ic iary's share of the amount f rom l ine 945 of Schedule 9.

– 346 –

Note Enter an aster isk (* ) beside the amount in box 45. In the footnote area, enter "Newfoundland and Labrador R&D" or "Yukon R&D," whichever appl ies, and the amount of th is credi t f rom box 45.

▲ Box 46 – Pension income qual i fy ing for an e l ig ib le annui ty for a minor

Enter the benef ic iary's share of the pension income that is e l ig ib le for a t ransfer to an e l ig ib le annui ty for cer ta in minors, f rom l ine 946 of Schedule 9 (a lso inc luded in box 26) .

Box 47 – Ret i r ing a l lowance qual i fy ing for t ransfer to an RPP or RRSP

Enter the benef ic iary's share of the ret i r ing a l lowance, which qual i f ies for a t ransfer to a registered pension p lan or registered ret i rement savings p lan, f rom l ine 947 of Schedule 9 (a lso inc luded in box 26) .

Box 48 – El ig ib le amount of char i table donat ions

Enter the benef ic iary's share of the char i table donat ions or g i f ts of a communal organizat ion, f rom l ine 948 of Schedule 9. For more informat ion, see Informat ion Circular IC78-5, Communal Organizat ions.

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▲ Appendix A – T3 slip and summary

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– 349 –

– 350 –

– 351 –

– 352 –

– 353 –

– 354 –

– 355 –

– 356 –

Completing this T3 Summary

Identi f ication Complete th is area using the same informat ion that you entered in the ident i f icat ion area on the T3 Trust Income Tax and Informat ion Return.

T3 sl ip totals Line 10 – Enter the total number of T3 s l ips that you have included wi th th is summary.

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The other l ine numbers in th is area are the same as the box numbers shown on a T3 s l ip . For each box number, add the amounts f rom al l of the T3 s l ips f i led wi th th is summary, and enter the tota l on the corresponding l ine of this summary.

Certif ication Ensure that you date and s ign th is area before sending us the summary.

Keep a copy of the T3 Summary wi th the t rust records.

Where to fi le this summary Jonquière Tax Centre Canada Revenue Agency T3 Program P.O. Box 1300, LCD Jonquière Jonquière QC G7S 0L5

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Mandatory electronic f i l ing

I f you f i le more than 50 T3 s l ips for a calendar year , you must f i le the s l ips over the Internet . You may choose one of the fo l lowing e lectronic f i l ing formats:

– Internet f i le t ransfer (XML)

– Web Forms

For more informat ion about f i l ing electronical ly, go to canada.ca/taxes-iref . You can also f i le T3 sl ips onl ine using the "Fi le a return" service and select ing the "Internet f i le transfer (XML)" opt ion at:

– canada.ca/taxes-representatives , i f you are an author ized employee or representat ive; or

– canada.ca/my-cra-business-account , i f you are the business owner .

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Web Forms You can e lectronical ly f i le up to 100 T3 s l ips in a s ingle submission using the Canada Revenue Agency Web forms appl icat ion. This serv ice a l lows you to:

– create e lectronic T3 s l ips

– val idate data in real t ime, wi th prompts to correct errors before f i l ing

– calculate the tota ls for the T3 Summary

– pr int T3 s l ips

– securely submit encrypted T3 s l ips over the Internet

– save and import data to be ret r ieved at a la ter date

For more informat ion about Web Forms, go to canada.ca/taxes-iref .

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Amending this T3 Summary I f you prepare and issue an amended T3 sl ip after you have f i led the original s l ip with us, you may have to f i le an amended T3 Summary. I f there is a change to the amounts in the boxes shown on the front of this summary, f i le an amended T3 Summary. I f the amended T3 sl ip affects the amounts shown on the T3 Trust Income Tax and Information Return, or on Schedule 9, Income Al locat ions and Designat ions to Benefic iar ies, do not f i le another T3 return. Instead, send us a completed Form T3-ADJ, T3 Adjustment Request, or a letter providing the detai ls of the change. Indicate the tax year you want us to change and attach any support ing documents. Include the trust 's account number on the letter.

Personal informat ion is col lected under the Income Tax Act to administer tax, benef i ts, and related programs. I t may also be used for any purpose related to the enforcement of the Act such as audit , compliance and col lect ion act iv i t ies. I t may be shared or veri f ied with other federal, provincial , terr i tor ial or foreign government inst i tut ions to the extent authorized by law. Fai lure to provide this informat ion may result in interest payable, penalt ies or other act ions. Under the Privacy

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Act, individuals have the r ight to access their personal information, request correct ion, or f i le a complaint to the Privacy Commissioner of Canada regarding the handl ing o f the indiv idual 's personal in format ion. Refer to Personal Informat ion Bank CRA PPU 015 on Info Source at canada.ca/cra- info-source .

Online services My Account The CRA's My Account serv ice is fast , easy, and secure. F ind out how to regis ter at canada.ca/my-cra-account .

Use My Account to: • v iew your benef i t and credi t in format ion

• v iew your not ice of assessment

• change your address, d irect deposi t in format ion, and mar i ta l s tatus

• register to receive emai l not i f icat ions when you have mai l to v iew in My Account and when important changes are made on your account

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• check your TFSA contr ibut ion room and RRSP deduct ion l imi t

• check the status of your tax return

• v iew and pr in t your proof of income statement (opt ion 'C ' pr int )

• send documents to the CRA

• send an enquiry about your audi t

• l ink between your CRA My Account and My Serv ice Canada Account

Receiving your CRA mail onl ine

Sign up for emai l not i f icat ions to get most of your CRA mai l , l ike your not ice of assessment, onl ine.

For more informat ion, go to canada.ca/cra-business-email -noti f ications .

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Submitting and fi l ing electronic documents to the T3 Estate and Trust Return programs Trust administrators and tax preparers can submit documents electronical ly for the T3 Estate and Trust Return programs for residents, non-residents and T3 ret irement compensation arrangements (T3 RCA). Sending documents through the Submit documents onl ine service is secure and rel iable, and i t makes sending documents easier and more eff ic ient.

Documents you can submit onl ine

The fo l lowing documents can be submit ted e lectronical ly for the T3 Estate and Trust Return programs:

• Form T3APP T3, Appl icat ion for Trust Account Number

• Form T3-ADJ T3, Adjustment Request

• support ing documents requested by the T3 Estate and Trust Return programs in order to complete the T3 tax assessment or reassessment

– 364 –

How to submit your document(s) onl ine

You can submit e lectronic documents for the T3 Estate and Trust Return programs through two of the CRA's secure por ta ls : My Account and Represent a Cl ient . To access the Submit Documents feature, t rust administ rators must log into My Account us ing thei r socia l insurance number. Tax preparers and t rust adminis t rators ' author ized representat ives can a lso access the Submit Documents feature by logging into Represent a Cl ient .

Once in My Account or Represent a Cl ient , se lect "Submit Documents" f rom the menu bar . Then enter your reference number or select " I do not have a case or reference number." The serv ice wi l l then take you to a p ick l is t page. From the p ick l is t , you wi l l se lect e i ther the task or the program area you want to submit your e lectronic document to.

After you submit your documents

After submit t ing documents, you wi l l receive a reference number for future communicat ion regarding the documents. You wi l l a lso receive a conf i rmat ion number. These numbers wi l l both be generated on the conf i rmat ion page.

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Al l e lectronical ly submit ted documents wi l l be scanned for malware and v i ruses according to Shared Serv ices Canada and/or Canada Revenue Agency pol ic ies and standards.

Successfu l ly scanned val id documents wi l l be d is t r ibuted to the appl icable T3 Estate and Trust Return programs for act ion.

Supporting documents

Elect ions, designat ions, agreements, waivers, specia l e lect ive returns ( inc luding any support ing documentat ion for the same), and Form T1135, Foreign Income Ver i f icat ion Statement are required to be sent to the CRA i f they apply to the T3 return you f i led e lectronical ly. Wi th the except ion of Form T1135, these documents are to be sent to the tax centre that serves the area where the t rustee res ides. Form T1135 is to be sent to the tax centre shown on that form. For more informat ion, go to canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/how-fi le-t3-return .

Keep al l support ing documentat ion used to prepare a return, such as, books, records, forms, schedules, and receipts for s ix years f rom the tax year-end to which they re late.

– 366 –

Reference or case numbers You do not need a reference or case number to submit documents e lectronical ly. The serv ice wi l l a l low you to select a task f rom a general p ick l is t to create your e lectronic submission.

Taxpayers can inc lude addi t ional documents to thei r or ig inal submission at any t ime.

I f you do have a reference number provided to you f rom your in i t ia l submission, you should use th is number when submit t ing any re la ted addi t ional documents.

Documents you can f i le onl ine You can f i le t rust forms electronical ly us ing the Canada Revenue Agency's secure Internet f i le t ransfer serv ice. In addi t ion to Form T3SUM, Summary of Trust Income Al locat ions and Designat ions, and Form T3, Statement of Trust Income Al locat ions and Designat ions, you can f i le the fo l lowing forms in XML format:

• T3RET, T3 Trust Income Tax and Informat ion Return – i f the t rust 's taxable income, tax payable and refundable credi ts are $0.00. For more informat ion, see "How to f i le the T3 return" on page 87 [18] .

– 367 –

• T3D, Income Tax Return for Deferred Prof i t Shar ing Plan (DPSP) or Revoked DPSP

• T3P, Employees' Pension Plan Income Tax Return

• T3S, Supplementary Unemployment Benef i t P lan Income Tax Return

• T3RI , Registered Investment Income Tax Return

• T3ATH-IND, Amateur Athlete Trust Income Tax Return

• T3M, Environmental Trust Income Tax Return

• T3GR, Group Income Tax and Informat ion Return for RRSP, RRIF, RESP, or RDSP Trusts

• T1061, Canadian Amateur Ath let ic Trust Group Informat ion Return

• T3PRP, T3 Pooled Registered Pension Plan Tax Return

• T2000, Calculat ion of Tax on Agreements to Acquire Shares (Sect ion 207.1(5) of the Income Tax Act)

For more informat ion, go to canada.ca/cra-submit-documents-online .

– 368 –

For more information Taxpayer Bil l of Rights The Taxpayer Bi l l o f Rights (TBR) descr ibes and def ines 16 r ights and bui lds upon the CRA's corporate values of in tegr i ty, professional ism, respect , and col laborat ion. I t descr ibes the t reatment you are ent i t led to when you deal wi th the CRA. The TBR also sets out the CRA Commitment to Smal l Business to ensure thei r in teract ions wi th the CRA are conducted as ef f ic ient ly and ef fect ive ly as possib le.

For more informat ion about your r ights and what you can expect when you deal wi th the CRA, go to canada.ca/taxpayer-r ights .

What if you need help? I f you need more information after reading this guide, vis i t canada.gc.ca/taxes or cal l 1-800-959-8281 .

Once a t rust return is f i led, the informat ion on i t becomes conf ident ia l . For th is reason, we fo l low cer ta in procedures before g iv ing out in format ion about the t rust . In format ion can be g iven only to the

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t rustee (or other legal representat ive, such as an executor , administ rator , assignee, receiver , or l iqu idator) or an author ized representat ive. The author ized representat ive could be an accountant , lawyer, or tax preparer act ing for the t rustee. You can author ize th is representat ive by complet ing and s igning Form T1013, Author iz ing or Cancel l ing a Representat ive. Al though benef ic iar ies are ent i t led to in format ion re lated to thei r personal tax s i tuat ion, they are not ent i t led to in format ion f rom us about the tax af fa i rs of the t rust .

Direct deposit Direct deposi t is a fast , convenient , re l iable, and secure way to get your CRA payments d i rect ly in to your account at a f inancia l ins t i tu t ion in Canada. To enrol for d i rect deposi t or to update your bank ing informat ion, go to canada.ca/cra-direct-deposit .

Forms and publications To get our forms and publ icat ions, go to canada.ca/cra-forms or cal l 1-800-959-8281 .

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Getting information by telephone I f you or your representat ive cal ls us, we wi l l ask:

• for your name and address, and the date you were appointed as t rustee

• whether a copy of the wi l l , t rust agreement , or let ters of administ rat ion has been f i led wi th us. I f not f i led, we wi l l ask for a copy or for some other form of proof that wi l l a l low us to g ive you the informat ion you need. I f you have quest ions about the assessment of the t rust 's return, we may a lso ask you for in format ion about the return

• for the date that your company was appointed as t rustee, i f you are an employee of a corporate t rustee

Teletypewriter (TTY) users I f you have a hear ing or speech impairment and use a TTY, cal l 1-800-665-0354 .

I f you use an operator-assis ted re lay serv ice, cal l our regular te lephone numbers instead of the TTY number.

– 371 –

Giving or cancell ing an authorization You can author ize a representat ive or cancel an author izat ion a l ready g iven by wr i t ing to us, or by sending a completed and s igned Form T1013, Author iz ing or Cancel l ing a Representat ive. You can inc lude th is form wi th a completed and s igned T3 Appl icat ion for Trust Account Number or the t rust 's T3 return, but do not s taple i t to the return.

The author izat ion, or cancel lat ion of an author izat ion, should inc lude al l o f the fo l lowing:

• the name, address, and account number of the t rust

• your representat ive 's name (only the business name of a f i rm or par tnership need appear , unless author izat ion is to be restr ic ted to a cer ta in member) and te lephone number

• the tax year or years to which the author izat ion, or cancel la t ion of the author izat ion, appl ies

• your s ignature and t i t le as the author ized s igning person ( t rustee, executor , administ rator , or l iqu idator ) , your te lephone number, and the date

– 372 –

You have to complete a separate wr i t ten author izat ion or consent form for each representat ive appointed or cancel led for a tax year or years. Note that author izing a new representat ive wi l l not cancel your exist ing author izat ions unless you ask us to cancel exist ing author izat ions.

Service-related complaints You can expect to be t reated fa i r ly under c lear and establ ished ru les, and get a h igh level of serv ice each t ime you deal wi th the Canada Revenue Agency (CRA); see the Taxpayer Bi l l o f Rights.

I f you are not sat isf ied wi th the serv ice you received, t ry to resolve the matter wi th the CRA employee you have been deal ing wi th or cal l the te lephone number provided in the CRA's correspondence. I f you do not have contact in format ion, go to canada.ca/cra-contact .

I f you st i l l d isagree wi th the way your concerns were addressed, you can ask to discuss the matter wi th the employee's superv isor .

I f you are st i l l not sat is f ied, you can f i le a serv ice complaint by f i l l ing out Form RC193, Serv ice-Related Complaint . For more informat ion and how to f i le a complaint , go to canada.ca/cra-service-complaints.

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I f the CRA has not resolved your serv ice-re lated complaint , you can submit a complaint wi th the Off ice of the Taxpayers ' Ombudsman.

Formal disputes (objections and appeals) I f you are not sat isf ied with an assessment, determinat ion, or decis ion, you have the r ight to regis ter a formal d ispute.

Reprisal complaints I f you have previously submitted a service-related complaint or requested a formal review of a CRA decision and feel that, as a result , you were treated unfair ly by a CRA employee, you can submit a repr isal complaint by f i l l ing out Form RC459, Repr isal Complaint .

For more informat ion about complaints and d isputes, go to canada.ca/cra-complaints-disputes .

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Index Topic Income Tax Act reference Page

Actual amount of d iv idends f rom taxable Canadian corporat ions

82(1) , 260(5) 123, 215 [24, 41]

Adjusted cost base 53, 54 182, 196 [35, 38]

Al locat ions and designat ions

104(6) , (13) , (19) , (20) , (21) , (22) , (22.1) , (27) , (27.1) , (29)

225 [43]

Al lowable business investment losses (ABIL)

38(c) , 39(1)(c) , 39(10) , 50(1) 140 [28]

Al lowable federal pol i t ica l contr ibut ion tax credi t

127(3) 293 [55]

Al ter ego t rust 104(4)(a) , 248(1) 181 [8]

– 375 –

Topic Income Tax Act reference Page

Amount resul t ing in cost base adjustment

53(1) , (2) 268, 343 [51, 64]

Amending, cancel l ing, adding, or replacing t rust-re lated informat ion s l ips

333 [61]

Arm's length t ransact ion 251(1) 19 [5]

Bonds 190 [37]

Br i t ish Columbia mining explorat ion tax credi t

159 [31]

Canadian cu l tura l property 39(1)(a)( i .1) , 118.1(10) 177 [34]

Capi ta l d isposi t ions 174 [34]

– 376 –

Topic Income Tax Act reference Page

Capi ta l gains 3, 38, 38.1, 39, 40, 138.1(3)

198, 257, 334 [38, 49,

63]

Capi ta l gains deduct ion 110.6(12) 158, 263, 336 [31, 50, 63]

Capi ta l gains refund 132 158 [31]

Carrying charges and interest expenses

20(1)(c) , (bb) , 20(2.1) 136, 219 [26, 42]

Clearance cer t i f icate 159(2) , (3) 107 [21]

Communal organizat ion 143 39 [9]

Complet ing the NR4 return 285 [54]

Crown royal t ies 134 [26]

– 377 –

Topic Income Tax Act reference Page

Death benef i ts 104(28), 248(1) 135, 265, 341 [26, 50, 64]

Deemed disposi t ion 104(4) , (5) , (5.1) , (5.2) 133, 201 [26, 39]

Deemed resident t rust 94(1) , 94(3) 36 [9]

Def in i t ions 18 [5]

Administ rator 18 [5]

Al locate, a l locat ion 19 [5]

Arm's length t ransact ion 20 [6]

Benef ic iary 21 [6]

Common- law partner 22 [6]

Contr ibut ion of property 18 [6]

– 378 –

Topic Income Tax Act reference Page

Deemed disposi t ion 22 [6]

Designate, designat ion 23 [6]

Dist r ibute, dis t r ibut ion 23 [6]

Executor 24 [6]

Exempt property 24 [6]

Gi f t 24 [6]

L iquidator 25 [6]

Preferred benef ic iary 25 [6]

Pr inc ipal res idence 26 [7]

Set t lor 27 [7]

Spouse 27 [7]

Testator 27 [7]

– 379 –

Topic Income Tax Act reference Page

Trust 27 [7]

Trustee 28 [7]

Vested interest 28 [7]

Wi l l 28 [7]

Designated benef ic iary 210 274 [52]

Dist r ibut ing the T3 s l ip 322 [61]

Dist r ibut ion of property to benef ic iar ies

104(5.3) , 107(2) , (2.1) , (2.2) , (4) 166 [32]

Div idend income 82(1) , 104(19) 215, 264 [41, 50]

Div idends, gross-up 82(1)(b) 222 [42]

Div idends, non-taxable received by a t rust

53(2) , 83(1) , (2) , 104(20) 218 [42]

– 380 –

Topic Income Tax Act reference Page

Donat ions and g i f ts 104(6) , 118.1, 143(3.1) 162, 270, 290, 346

[32, 51, 55, 65]

E lect ion – 164(6) 169 [33]

Elect ion – 164(6.1) 171 [33]

Elect ion to defer payment of tax (Form T2223)

159(6.1) , (7) 209 [40]

Elect ions ( la te or amended)

220(3.2) , Reg. 600 102 [21]

El ig ib le benef ic iary 277 [52]

Employee benef i t p lan 6(1)(g) , 6(10) , 12(1)(n.1) , 18(1)(o) , 32.1, 104(6) , 248(1)

55 [10]

– 381 –

Topic Income Tax Act reference Page

Employee l i fe and heal th t rust

144.1(2) 55 [12]

Employee t rust 6(1)(h) , 104(6) , 248(1) 45 [10]

Exempt ion f rom Form T1055 deemed disposi t ions

108(1) 207 [40]

Farming and f ish ing losses 31, 111(1)(c) , (d) , 111(8) 155 [30]

Farming income 124 [24]

Federal d iv idend tax credi t 121 288 [54]

Federal fore ign tax credi t 20(11) , (12) , 126 291 [55]

Federal income tax 286 [54]

Federal pol i t ica l contr ibut ion tax credi t

127(3)

– 382 –

Topic Income Tax Act reference Page

Final return 86 [18]

F ishing income 124 [24]

Foreign investment income 123, 216 [24, 41]

Foreign non-business income tax paid

104(22.1) , 126(1)(a) 265, 340 [50, 64]

Foreign property – Report ing requirements

113 [22]

G raduated rate estate 248(1) 66 [14]

Gross-up amount of d iv idends

82(1)(b) 222 [42]

How to f i le the T3 s l ip and summary

317 [60]

– 383 –

Topic Income Tax Act reference Page

How to register a formal d ispute

165(1) 104 [21]

Ident i f icat ion and other required informat ion

108 [21]

Income paid or payable to non-resident benef ic iar ies

104(13), 212(1)(c) 255 [48]

Income paid or payable to res ident benef ic iar ies

254 [48]

Income to be taxed in the t rust

241 [46]

Insurance segregated fund t rust

138.1 44 [10]

Inter v ivos t rust 108(1) , 122 31, 82, 70, 304 [7, 17,

15, 58]

– 384 –

Topic Income Tax Act reference Page

In terest 161, 164(3) , 248(11), Reg. 4300, 4301, 4302 97 [20]

Internat ional f inancia l report ing standards

119 [23]

Investment income 123, 215 [24, 41]

Investment tax credi t ( ITC) 13(7.1) , 37(1) , 127(5) , (12.3)

267, 275 [51, 56]

Investment tax credi t – designated

127(7) 267, 353 [51, 64]

Joint spousal or common- law partner t rust

104(4)(a) , 248(1) 34 [8]

L is ted personal property 41, 54 152, 196 [30, 38]

– 385 –

Topic Income Tax Act reference Page

Loss carryback, request 152 [30]

Loss restr ic t ion event 251.2(2) 148 [29]

Lump-sum pension income 60( j ) , 104(27), (27.1) 260 [49]

Master t rust 149(1)(o.4) , Reg. 4802(1.1) 48 [11]

Min imum tax 120.2, 127.5 to 127.55 298, 348 [56, 57]

Mutual fund t rust 132(6) , (6.1) , (7) , Reg. 4801, 4803 41 [10]

Mutual fund uni ts and other shares

248(1) 189 [36]

My Account 361 [69]

Net capi ta l losses of other years

3, 38, 39, 104(21), 111(1)(b) , 111(8) 151 [30]

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Topic Income Tax Act reference Page

Newfoundland and Labrador research and development tax credi t

159, 269, 345 [31, 51, 65]

Non-capi ta l losses of other years

111(1)(a) , 111(8) 150 [29]

Non-prof i t organizat ion 149(1)( l ) , 149(5) , (12) 50 [11]

Non-resident benef ic iary 255, 285 [48, 54]

Non-resident tax payable 212(1)(c) 282 [53]

Non-resident t rusts 16, 314 [5, 59]

Non-resident wi thhold ing tax – Par t XI I I

212 280 [53]

O ther credi ts 159 [31]

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Topic Income Tax Act reference Page

Other income 134, 261, 335 [26, 50, 63]

Other investment income 123, 217 [24, 42]

Other required informat ion 116 [23]

Out lays and expenses 40(1) 184 [36]

Part XI I .2 tax 210 to 210.3 271 [51]

Part XI I .2 tax credi t 210.2(3) , (4) 158, 267, 341 [31, 51, 64]

Part XI I I tax 212 to 217 280 [53]

Penal t ies 162(1) , (2) , (7) , 163(1) , 238(1) , Reg. 209 94 [19]

– 388 –

Topic Income Tax Act reference Page

Pension income (benef i ts) 56(1)(a)( i ) , 147(10) 122, 261, 340 [24, 50, 64]

Personal t rust 248(1) 31 [8]

Personal-use property 40(2)(g)( i i i ) , 46, 54 191 [37]

Pol i t ica l contr ibut ion tax credi t ( federal )

127(3) 293 [56]

Preferred benef ic iary e lect ion

104(12), (14) , (14.01) , (14.02) , (15) , 108(1) , Reg. 2800

248, 256 [47, 49]

Pr inc ipal res idence 40(2)(c) , (4) , 54, 107(2.01)

26, 192 [7, 37]

Proceeds of d isposi t ion 54, 107(2) , (4) 177 [34]

– 389 –

Topic Income Tax Act reference Page

Property acquired before 1972

40(1) , ITAR 24, 26(3) , 26(7) 184 [36]

Qual i f ied d isabi l i t y t rust (QDT)

122(2) 67 [14]

Qual i f ied farm or f ish ing property

110.6(1) , (14) , 248(1) 188 [36]

Qual i f ied smal l business corporat ion shares

110.6(1) , (14) , 248(1) 186 [36]

Qual i fy ing envi ronmenta l t rust

211.6(1) 56 [12]

Qual i fy ing pension income 104(27), 118(7) 264, 346 [50, 65]

Real estate and depreciab le property

13(21), ITAR 20(1) 190 [37]

– 390 –

Topic Income Tax Act reference Page

Reassessments 152(3.1) , (4) , (4.1) , (4.2) , 244(14), (15) 100 [20]

Recip ient ident i f icat ion number

162(5) , (6) , 237, 239(2.3) 321, 330 [61, 67]

Refundable Part XI I .2 tax credi t

158, 272, 341 [31, 51, 64]

Refundable Quebec abatement

120(2) 299 [57]

Registered d isabi l i t y savings p lan (RDSP) t rust

51 [11]

Registered ret i rement savings p lans (RRSP)

135, 226, 346 [26, 43, 65]

Rental income 124 [24]

– 391 –

Topic Income Tax Act reference Page

Reserves on d isposi t ions of capi ta l property

40(1)(a)( i i i ) 198 [38]

Residence of t rust 87, 312 [18, 59]

Ret i rement compensat ion arrangement (RCA)

248(1) 40 [9]

Royal t ies 12(1)(o) 134 [26]

RRSP, RRIF, or RESP t rusts

50 [11]

Salary defer ra l arrangement

6(1)(a) , ( i ) , 6(11) , (12) , 248(1) 43 [10]

Schedule 1 – Disposi t ions of Capi ta l Property

162 [32]

– 392 –

Topic Income Tax Act reference Page

Schedule 8 – Investment Income, Carrying Charges, and Gross-up Amount of Div idends Retained by the Trust

215 [41]

Schedule 9 – Income Al locat ions and Designat ions to Benef ic iar ies

104(13), (14) , 108(1) , 212(1)(c) , Reg. 2800 224 [43]

Schedule 10 – Part XI I .2 Tax and Part XI I I Non-Resident Withhold ing Tax

271 [51]

Schedule 11 – Federal Income Tax

286 [54]

– 393 –

Topic Income Tax Act reference Page

Schedule 12 – Minimum Tax

300 [57]

Secur i ty opt ions deduct ion 164(6.1) 171 [33]

Serv ice complaints 372 [71]

Speci f ied income 210.2(2) 273 [52]

Speci f ied investment f low-through (SIFT) t rust

53 [12]

Speci f ied t rust 108(1) 33 [8]

Spl i t income 120.4 227 [44]

Spousal or common- law partner t rust

104(4)(a) , 108(1) 34 [8]

Summary of deemed disposi t ions (Form T1055)

104(4) , (5) , (5.1) , (5.2) 201 [39]

– 394 –

Topic Income Tax Act reference Page

Surtax on income not subject to provinc ia l or terr i tor ia l tax

120(1) 290 [55]

T3 sl ip (complet ing and dist r ibut ing)

329 [62]

Tax paid by insta lments 156 [30]

Taxable capi ta l gains 3, 38, 39, 40(1) , 104(21), (21.3)

120, 200 [24, 34]

Taxable capi ta l gains e l ig ib le for deduct ion

104(21), (21.1) , (21.2) , 110.6

263, 336 [50, 63]

Tax- f ree savings account (TFSA) t rust

146.2(5) , 248(1) 54 [12]

Taxpayer Bi l l o f Rights 376 [71]

Tax year 104(23), 248, 249(1)(b) 82 [17]

– 395 –

Topic Income Tax Act reference Page

Testamentary t rust 73, 108(1) , 248(8) , (9.1) 29, 69, 287 [7, 15, 54]

Tota l capi ta l losses t ransferred under 164(6)

199 [38]

Tota l income al locat ions and designat ions to benef ic iar ies

146, 224, 257 [29, 43, 49]

Transfer and loans of property

56(4.1) to (4.3) , 74.1(1) , (2) , 74.2, 74.3, 74.5, 248(25), 251, 252

214 [41]

Transfer of t rust property to another t rust

104(5.8) 214 [41]

Trustee fees 9(1) , 20(1)(bb) 137 [26]

Types of t rusts 29 [7]

– 396 –

Topic Income Tax Act reference Page

Uni t t rust 108(2) 38 [9]

Upkeep, maintenance, taxes – Benef ic iary

105(2) 144 [28]

Value of other benef i ts to a benef ic iary

105(1) 145 [28]

Yukon research and development tax credi t

159, 269, 345 [31, 51, 65]