Income Tax Act
Marginal note:Reference to trust or estate
104 (1) In this Act, a reference to a trust or estate (in this subdivision referred to as a “trust”) shall, unless the context otherwise requires, be read to include a reference to the trustee, executor, administrator, liquidator of a succession, heir or other legal representative having ownership or control of the trust property, but, except for the purposes of this subsection, subsection (1.1), subparagraph (b)(v) of the definition disposition in subsection 248(1) and paragraph (k) of that definition, a trust is deemed not to include an arrangement under which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property unless the trust is described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1).
Restricted meaning of beneficiary
(1.1) Notwithstanding subsection 248(25.1) and for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time where the person or partnership is beneficially interested in the trust at the particular time solely because of
(a) a right that may arise as a consequence of the terms of the will or other testamentary instrument of an individual who, at the particular time, is a beneficiary under the trust;
(b) a right that may arise as a consequence of the law governing the intestacy of an individual who, at that time, is a beneficiary under the trust;
(c) a right as a shareholder under the terms of the shares of the capital stock of a corporation that, at the particular time, is a beneficiary under the trust;
(d) a right as a member of a partnership under the terms of the partnership agreement, where, at the particular time, the partnership is a beneficiary under the trust; or
(e) any combination of rights described in paragraphs (a) to (d).
Marginal note:Taxed as individual
(2) A trust shall, for the purposes of this Act, and without affecting the liability of the trustee or legal representative for that person’s own income tax, be deemed to be in respect of the trust property an individual, but where there is more than one trust and
(a) substantially all of the property of the various trusts has been received from one person, and
(b) the various trusts are conditioned so that the income thereof accrues or will ultimately accrue to the same beneficiary, or group or class of beneficiaries,
such of the trustees as the Minister may designate shall, for the purposes of this Act, be deemed to be in respect of all the trusts an individual whose property is the property of all the trusts and whose income is the income of all the trusts.
Marginal note:Deemed disposition by trust
(4) Every trust is, at the end of each of the following days, deemed to have disposed of each property of the trust (other than exempt property) that was capital property (other than excluded property or depreciable property) or land included in the inventory of a business of the trust for proceeds equal to its fair market value (determined with reference to subsection 70(5.3)) at the end of that day and to have reacquired the property immediately after that day for an amount equal to that fair market value, and for the purposes of this Act those days are
(a) where the trust
(i) is a trust that was created by the will of a taxpayer who died after 1971 and that, at the time it was created, was a trust,
(i.1) is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(b) or 70(5.2)(d) or 70(6)(d) applied and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust,
(ii) is a trust that was created after June 17, 1971 by a taxpayer during the taxpayer’s lifetime that, at any time after 1971, was a trust, or
(ii.1) is a trust (other than a trust the terms of which are described in clause (iv)(A) that elects in its return of income under this Part for its first taxation year that this subparagraph not apply) that was created after 1999 by a taxpayer during the taxpayer’s lifetime and that, at any time after 1999, was a trust
under which
(iii) the taxpayer’s spouse or common-law partner was entitled to receive all of the income of the trust that arose before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner could, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust, or
(iv) in the case of a trust described in subparagraph (ii.1) created by a taxpayer who had attained 65 years of age at the time the trust was created,
(A) the taxpayer was entitled to receive all of the income of the trust that arose before the taxpayer’s death and no person except the taxpayer could, before the taxpayer’s death, receive or otherwise obtain the use of any of the income or capital of the trust,
(B) the taxpayer or the taxpayer’s spouse was, in combination with the spouse or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the spouse and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, or
(C) the taxpayer or the taxpayer’s common-law partner was, in combination with the common-law partner or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the common-law partner and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust,
the day on which the death or the later death, as the case may be, occurs;
(a.1) where the trust is a pre-1972 spousal trust on January 1, 1993 and the spouse or common-law partner referred to in the definition pre-1972 spousal trust in subsection 108(1) in respect of the trust was
(i) in the case of a trust created by the will of a taxpayer, alive on January 1, 1976, and
(ii) in the case of a trust created by a taxpayer during the taxpayer’s lifetime, alive on May 26, 1976,
the day that is the later of
(iii) the day on which that spouse or common-law partner dies, and
(iv) January 1, 1993;
(a.2) where the trust makes a distribution to a beneficiary in respect of the beneficiary’s capital interest in the trust, it is reasonable to conclude that the distribution was financed by a liability of the trust and one of the purposes of incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of any individual, the day on which the distribution is made (determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust);
(a.3) where property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) has been transferred by a taxpayer after December 17, 1999 to the trust in circumstances to which subsection 73(1) applied, it is reasonable to conclude that the property was so transferred in anticipation that the taxpayer would subsequently cease to reside in Canada and the taxpayer subsequently ceases to reside in Canada, the first day after that transfer during which the taxpayer ceases to reside in Canada (determined as if a day ends for the trust immediately after each time at which the taxpayer ceases to be resident in Canada);
(a.4) where the trust is a trust to which property was transferred by a taxpayer who is an individual (other than a trust) in circumstances in which section 73 or subsection 107.4(3) applied, the transfer did not result in a change in beneficial ownership of that property and no person (other than the taxpayer) or partnership has any absolute or contingent right as a beneficiary under the trust (determined with reference to subsection (1.1)), the day on which the death of the taxpayer occurs;
(b) the day that is 21 years after the latest of
(i) January 1, 1972,
(ii) the day on which the trust was created, and
(iii) where applicable, the day determined under paragraph (a), (a.1) or (a.4) as those paragraphs applied from time to time after 1971; and
(c) the day that is 21 years after any day (other than a day determined under any of paragraphs (a) to (a.4)) that is, because of this subsection, a day on which the trust is deemed to have disposed of each such property.
Marginal note:Depreciable property
(5) Every trust is, at the end of each day determined under subsection (4) in respect of the trust, deemed to have disposed of each property of the trust (other than exempt property) that was a depreciable property of a prescribed class of the trust for proceeds equal to its fair market value at the end of that day and to have reacquired the property immediately after that day at a capital cost (in this subsection referred to as the “deemed capital cost”) equal to that fair market value, except that
(a) where the amount that was the capital cost to the trust of the property immediately before the end of the day (in this paragraph referred to as the “actual capital cost”) exceeds the deemed capital cost to the trust of the property, for the purpose of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) as they apply in respect of the property at any subsequent time,
(i) the capital cost to the trust of the property on its reacquisition shall be deemed to be the amount that was the actual capital cost to the trust of the property, and
(ii) the excess shall be deemed to have been allowed under paragraph 20(1)(a) to the trust in respect of the property in computing its income for taxation years that ended before the trust reacquired the property;
(b) for the purposes of this subsection, the reference to “at the end of a taxation year” in subsection 13(1) shall be read as a reference to “at the particular time a trust is deemed by subsection 104(5) to have disposed of depreciable property of a prescribed class”; and
(c) for the purpose of computing the excess, if any, referred to in subsection 13(1) at the end of the taxation year of a trust that included a day on which the trust is deemed by this subsection to have disposed of a depreciable property of a prescribed class, any amount that, on that day, was included in the trust’s income for the year under subsection 13(1) as it reads because of paragraph 104(5)(b), shall be deemed to be an amount included under section 13 in the trust’s income for a preceding taxation year.
Marginal note:Idem
(5.1) Every trust that holds an interest in a NISA Fund No. 2 that was transferred to it in circumstances to which paragraph 70(6.1)(b) applied shall be deemed, at the end of the day on which the spouse or common-law partner referred to in that paragraph dies (in this subsection referred to as the “spouse or common-law partner”), to have been paid an amount out of the fund equal to the amount, if any, by which
(a) the balance at the end of that day in the fund so transferred
exceeds
(b) such portion of the amount described in paragraph 104(5.1)(a) as is deemed by subsection 104(14.1) to have been paid to the spouse or common-law partner.
Marginal note:Resource property
(5.2) Where at the end of a day determined under subsection (4) in respect of a trust, the trust owns a Canadian resource property (other than an exempt property) or a foreign resource property (other than an exempt property),
(a) for the purposes of determining the amounts under subsection 59(1), paragraphs 59(3.2)(c) and (c.1), subsections 66(4) and 66.2(1), the definition cumulative Canadian development expense in subsection 66.2(5), the definition cumulative foreign resource expense in subsection 66.21(1), subsection 66.4(1) and the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), the trust is deemed
(i) to have a taxation year (in this subsection referred to as the “old taxation year”) that ended at the end of that day and a new taxation year that begins immediately after that day, and
(ii) to have disposed, immediately before the end of the old taxation year, of each of those properties for proceeds that became receivable at that time equal to its fair market value at that time and to have reacquired, at the beginning of the new taxation year, each such property for an amount equal to that fair market value; and
(b) for the particular taxation year of the trust that included that day, the trust shall
(i) include in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c) in respect of the old taxation year and the amount so included shall, for the purposes of the determination of B in the definition cumulative Canadian development expense in subsection 66.2(5), be deemed to have been included in computing its income for a preceding taxation year,
(i.1) include in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c.1) in respect of the old taxation year and the amount so included is, for the purpose of determining the value of B in the definition cumulative foreign resource expense in subsection 66.21(1), deemed to have been included in computing its income for a preceding taxation year, and
(ii) deduct in computing its income for the particular taxation year the amount, if any, determined under subsection 66(4) in respect of the old taxation year and the amount so deducted shall, for the purposes of paragraph 66(4)(a), be deemed to have been deducted for a preceding taxation year.
Marginal note:Election
(5.3) Where a trust files an election under this subsection in prescribed form with the Minister within 6 months after the end of a taxation year of the trust that includes a day before 1999 (in this subsection referred to as the “disposition day”) that would, but for this subsection, be determined in respect of the trust under paragraph 104(4)(a.1) in the case of a trust described in that paragraph, or under paragraph 104(4)(b) in any other case, and there is an exempt beneficiary under the trust on the disposition day,
(a) for the purposes of subsections 104(4) to 104(5.2), paragraph 104(6)(b) and subsection 159(6.1), the day determined under paragraph 104(4)(a.1) or 104(4)(b), as the case may be, in respect of the trust is deemed to be the earlier of
(i) January 1, 1999, and
(ii) the first day of the trust’s first taxation year that begins after the first day after the disposition day throughout which there is no exempt beneficiary under the trust;
(b) subsection 107(2) does not apply to a distribution made by the trust during the period
(i) beginning immediately after the disposition day, and
(ii) ending at the end of the first day after the disposition day that is determined in respect of the trust under subsection 104(4)
to any beneficiary (other than an individual who is an exempt beneficiary under the trust immediately before the time of the distribution);
(b.1) where the trust filed the form before March 1995, paragraph 104(5.3)(b) does not apply to distributions made by the trust after February 1995; and
(c) subsection 107.4(3) does not apply to a disposition by the trust during the period
(i) beginning immediately after the disposition day, and
(ii) ending at the end of the first day after the disposition day that is determined in respect of the trust under subsection 104(4).
(d) [Repealed, 2001, c. 17, s. 78(11)]
Marginal note:Revocation of election
(5.31) Where a trust that has filed an election under subsection 104(5.3) before July 1995 applies before 1997 to the Minister in writing for permission to revoke the election and the Minister grants permission to revoke the election,
(a) the election is deemed, otherwise than for the purposes of this subsection, never to have been made;
(b) the trust is not liable to any penalty under this Act to the extent that the liability would, but for this paragraph, have increased because of the revocation of the election; and
(c) notwithstanding subsections 152(4) to 152(5), such assessments of tax, interest and penalties under this Act shall be made as are necessary to take into account the consequences of the revocation of the election.
Marginal note:Exempt beneficiary
(5.4) For the purpose of subsection 104(5.3), an exempt beneficiary under a trust at a particular time is an individual who is alive and a beneficiary under the trust at the particular time, where
(a) in the case of a trust that was created after February 11, 1991, the individual, or an individual who, otherwise than because of subsection 252(2), is the brother or sister of the individual, was alive at the earlier of
(i) the time the trust was created, and
(ii) the earliest of all times each of which is the time that another trust was created that, before the particular time and the end of the day that would, but for subsection 104(5.3), be determined in respect of the trust under paragraph 104(4)(a.1) or 104(4)(b), transferred property to the trust either
(A) directly, or
(B) indirectly through one or more trusts,
in circumstances in which subsection 104(5.8) applies; and
(b) the individual or the individual’s spouse or common-law partner or former spouse or common-law partner was
(i) the designated contributor in respect of the trust, or
(ii) a grandparent, parent, brother, sister, child, niece or nephew
(A) of the designated contributor in respect of the trust, or
(B) of the spouse or common-law partner or former spouse or common-law partner of the designated contributor in respect of the trust.
Marginal note:Beneficiary
(5.5) For the purpose of subsection 104(5.4), a beneficiary under a trust is an individual who is beneficially interested in the trust, except that an individual shall be deemed not to be a beneficiary under a trust at a particular time
(a) where
(i) the interests in the trust at the particular time of all individuals who would, if this Act were read without reference to this paragraph, be exempt beneficiaries under the trust are conditional on or subject to the exercise of a discretionary power by a person,
(ii) by the exercise of (or the failure to exercise) such power under the terms of the trust after the particular time, all interests in the trust of
(A) those individuals, and
(B) other individuals who are children of deceased individuals who, if this Act were read without reference to this paragraph, would have been exempt beneficiaries under the trust at any time before the particular time
may terminate before the time at which the last of those individuals and the other individuals dies and without any of those individuals or the other individuals enjoying any benefit under the trust after the particular time, and
(iii) the trust was created after February 11, 1991 or subparagraph 104(5.5)(a)(ii) applies in respect of the trust because of a variation of the terms of the trust occurring after February 11, 1991; or
(b) where it is reasonable to consider that one of the main purposes for the creation of the interest of the individual in the trust was to defer the day determined under paragraph 104(4)(a.1) or 104(4)(b) in respect of the trust.
Marginal note:Designated contributor
(5.6) For the purpose of subsection 104(5.4), a designated contributor in respect of a trust is
(a) where the trust is described in paragraph 104(4)(a) or was, on December 20, 1991, a pre-1972 spousal trust, the individual who created (or whose will created) the trust;
(b) where paragraph 104(5.6)(a) does not apply and the trust is a testamentary trust at the end of the taxation year for which it makes an election under subsection 104(5.3), the individual as a consequence of whose death the trust was created; and
(c) in the case of any other trust, the individual who was, or who was related to, an individual beneficially interested in the trust and who is designated by the trust in its election under subsection 104(5.3)
(i) where, at each time in the relevant period, the total amount of property transferred or loaned before that time by the designated individual (either directly or through another trust) to the trust
(A) exceeded the total amount of property so transferred or loaned before that time by each other individual who was born before the designated individual and who, at any time, was related to any individual beneficially interested in the trust, and
(B) was not less than the total amount of property so transferred or loaned before that time by each other individual who was born after the designated individual and who, at any time, was related to any individual beneficially interested in the trust,
(ii) where
(A) no individual may be designated in respect of the trust because of subparagraph 104(5.6)(c)(i),
(B) the designated individual transferred or loaned property (either directly or through another trust) to the trust at any time before the end of the relevant period, and
(C) the designated individual was born before all other individuals who
(I) at any time were related to any individual beneficially interested in the trust or to any individual who transferred or loaned property to the trust before the end of the relevant period, and
(II) transferred or loaned property (either directly or through another trust) to the trust at any time before the end of the relevant period, or
(iii) where throughout the relevant period the property of the trust consisted primarily of
(A) shares of the capital stock of a corporation
(I) controlled, on the day that the trust was created or at the beginning of the relevant period, by the designated individual or by the designated individual and one or more other individuals born after, and related to, the designated individual, or
(II) all or substantially all of the value of which throughout the relevant period derived from property transferred to the corporation by the designated individual or by the designated individual and one or more other individuals born after, and related to, the designated individual,
(B) shares of the capital stock of a corporation all or substantially all of the value of which, throughout the part of the relevant period throughout which the shares were held by the trust, derived from shares described in clause 104(5.6)(c)(iii)(A),
(C) property substituted for the shares described in clause 104(5.6)(c)(iii)(A) or 104(5.6)(c)(iii)(B),
(D) property attributable to profits, gains or distributions in respect of property described in clause 104(5.6)(c)(iii)(A), 104(5.6)(c)(iii)(B) or 104(5.6)(c)(iii)(C), or
(E) any combination of the properties described in clauses 104(5.6)(c)(iii)(A) to 104(5.6)(c)(iii)(D).
Marginal note:Idem
(5.7) For the purpose of subsection 104(5.6),
(a) the relevant period in respect of a trust is the period that begins one year after the day on which the trust was created and ends at the end of the day that would, but for the election of the trust under subsection 104(5.3), be determined in respect of the trust under paragraph 104(4)(a.1) or 104(4)(b), as the case may be;
(b) 2 individuals shall be deemed to be related to each other where one of them is the aunt, great aunt, uncle or great uncle of the other individual;
(c) an individual shall be deemed not to be a designated contributor in respect of a trust where it is reasonable to consider that one of the main purposes of a series of transactions or events that includes
(i) an individual becoming a trustee in respect of trust property, or
(ii) an acquisition of property or a borrowing by any individual
was to defer the day determined under paragraph 104(4)(b) in respect of the trust; and
(d) in determining whether all or substantially all of the value of shares of the capital stock of a corporation is derived from other property, the other property shall be deemed to include property substituted for the other property and property attributable to profits, gains or distributions in respect of the other property and the substituted property.
Marginal note:Trust transfers
(5.8) Where capital property (other than excluded property), land included in inventory, Canadian resource property or foreign resource property is transferred at a particular time by a trust (in this subsection referred to as the “transferor trust”) to another trust (in this subsection referred to as the “transferee trust”) in circumstances in which subsection 107(2) or 107.4(3) or paragraph (f) of the definition disposition in subsection 248(1) applies,
(a) for the purposes of applying subsections 104(4) to 104(5.2) after the particular time,
(i) subject to paragraphs (b) to (b.3), the first day (in this subsection referred to as the “disposition day”) that ends at or after the particular time that would, if this section were read without reference to paragraphs (4)(a.2) and (a.3), be determined in respect of the transferee trust is deemed to be the earliest of
(A) the first day ending at or after the particular time that would be determined under subsection 104(4) in respect of the transferor trust without regard to the transfer and any transaction or event occurring after the particular time,
(B) the first day ending at or after the particular time that would otherwise be determined under subsection 104(4) in respect of the transferee trust without regard to any transaction or event occurring after the particular time,
(C) the first day that ends at or after the particular time, where
(I) the transferor trust is a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1), and
(II) the spouse or common-law partner referred to in paragraph (4)(a) or in the definition pre-1972 spousal trust in subsection 108(1) is alive at the particular time,
(C.1) the first day that ends at or after the particular time, where
(I) the transferor trust is an alter ego trust, a trust to which paragraph (4)(a.4) applies or a joint spousal or common-law partner trust, and
(II) the taxpayer referred to in paragraph (4)(a) or (a.4), as the case may be, is alive at the particular time, and
(D) where
(I) the disposition day would, but for the application of this subsection to the transfer, be determined under paragraph 104(5.3)(a) in respect of the transferee trust, and
(II) the particular time is after the day that would, but for subsection 104(5.3), be determined under paragraph 104(4)(b) in respect of the transferee trust,
the first day ending at or after the particular time, and
(ii) where the disposition day determined in respect of the transferee trust under subparagraph 104(5.8)(a)(i) is earlier than the day referred to in clause 104(5.8)(a)(i)(B) in respect of the transferee trust, subsections 104(4) to 104(5.2) do not apply to the transferee trust on the day referred to in clause 104(5.8)(a)(i)(B) in respect of the transferee trust;
(b) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1),
(ii) the spouse or common-law partner referred to in paragraph (4)(a) or in the definition pre-1972 spousal trust in subsection 108(1) is alive at the particular time, and
(iii) the transferee trust is a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1);
(b.1) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is an alter ego trust,
(ii) the taxpayer referred to in paragraph (4)(a) is alive at the particular time, and
(iii) the transferee trust is an alter ego trust;
(b.2) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a joint spousal or common-law partner trust,
(ii) either the taxpayer referred to in paragraph (4)(a), or the spouse or common-law partner referred to in that paragraph, is alive at the particular time, and
(iii) the transferee trust is a joint spousal or common-law partner trust;
(b.3) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a trust to which paragraph (4)(a.4) applies,
(ii) the taxpayer referred to in paragraph (4)(a.4) is alive at the particular time, and
(iii) the transferee trust is a trust to which paragraph (4)(a.4) applies; and
(c) for the purposes of subsection 104(5.3), unless a day ending before the particular time has been determined under paragraph 104(4)(a.1) or 104(4)(b) or would, but for subsection 104(5.3), have been so determined, a day determined under subparagraph 104(5.8)(a)(i) shall be deemed to be a day determined under paragraph 104(4)(a.1) or 104(4)(b), as the case may be, in respect of the transferee trust.
Marginal note:Deduction in computing income of trust
(6) For the purposes of this Part, there may be deducted in computing the income of a trust for a taxation year
(a) in the case of an employee trust, the amount by which the amount that would, but for this subsection, be its income for the year exceeds the amount, if any, by which
(i) the total of all amounts each of which is its income for the year from a business
exceeds
(ii) the total of all amounts each of which is its loss for the year from a business;
(a.1) in the case of a trust governed by an employee benefit plan, such part of the amount that would, but for this subsection, be its income for the year as was paid in the year to a beneficiary;
(a.2) where the taxable income of the trust for the year is subject to tax under this Part because of paragraph 146(4)(c) or subsection 146.3(3.1), the part of the amount that, but for this subsection, would be the income of the trust for the year that was paid in the year to a beneficiary;
(a.3) in the case of an inter vivos trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, such part of its income for the year as became payable in the year to a beneficiary; and
(b) in any other case, such amount as the trust claims not exceeding the amount, if any, by which
(i) such part (in this section referred to as the trust’s adjusted distributions amount for the taxation year) of the amount that, but for
(A) this subsection,
(B) subsections 104(5.1), 104(12), and 107(4),
(C) the application of subsections 104(4), 104(5) and 104(5.2) in respect of a day determined under paragraph 104(4)(a), and
(D) subsection 12(10.2), except to the extent that that subsection applies to amounts paid to a trust described in paragraph 70(6.1)(b) and before the death of the spouse or common-law partner referred to in that paragraph,
would be its income for the year as became payable in the year to a beneficiary or was included under subsection 105(2) in computing the income of a beneficiary
exceeds
(ii) where the trust
(A) is a post-1971 spousal or common-law partner trust that was created after December 20, 1991, or
(B) would be a post-1971 spousal or common-law partner trust if the reference in paragraph (4)(a) to “at the time it was created” were read as “on December 20, 1991”,
and the spouse or common-law partner referred to in paragraph 104(4)(a) in respect of the trust is alive throughout the year, such part of the amount that, but for
(C) this subsection,
(D) subsections 104(12) and 107(4), and
(E) subsection 12(10.2), except to the extent that that subsection applies to an amount paid to a trust described in paragraph 70(6.1)(b) and before the death of the spouse or common-law partner referred to in that paragraph,
would be its income for the year as became payable in the year to a beneficiary (other than the spouse or common-law partner) or was included under subsection 105(2) in computing the income of a beneficiary (other than the spouse or common-law partner),
(ii.1) where the trust is an alter ego trust or a joint spousal or common-law partner trust and the death or later death, as the case may be, referred to in subparagraph (4)(a)(iv) has not occurred before the end of the year, such part of the amount that, but for this subsection and subsections (12), 12(10.2) and 107(4), would be its income as became payable in the year to a beneficiary (other than a taxpayer, spouse or common-law partner referred to in clause (4)(a)(iv)(A), (B) or (C)) or was included under subsection 105(2) in computing the income of a beneficiary (other than such a taxpayer, spouse or common-law partner),
(iii) where the trust is an alter ego trust, a joint spousal or common-law partner trust, a trust to which paragraph (4)(a.4) applies or a post-1971 spousal or common-law partner trust and the death or the later death, as the case may be, referred to in paragraph (4)(a) or (a.4) in respect of the trust occurred on a day in the year, the amount, if any, by which
(A) the maximum amount that would be deductible under this subsection in computing the trust’s income for the year if this subsection were read without reference to this subparagraph
exceeds the total of
(B) the amount that, but for this subsection and subsections (12), 12(10.2) and 107(4), would be its income that became payable in the year to the taxpayer, spouse or common-law partner referred to in subparagraph (4)(a)(iii), clause (4)(a)(iv)(A), (B) or (C) or paragraph (4)(a.4), as the case may be, and
(C) the amount that would be the trust’s income for the year if that income were computed without reference to this subsection and subsection (12) and as if the year began immediately after the end of the day, and
(iv) where the trust is a SIFT trust for the taxation year, the amount, if any, by which
(A) its adjusted distributions amount for the taxation year
exceeds
(B) the amount, if any, by which
(I) the amount that would, if this Act were read without reference to this subsection, be its income for the taxation year
exceeds
(II) its non-portfolio earnings for the taxation year.
Marginal note:Non-resident beneficiary
(7) No deduction may be made under subsection 104(6) in computing the income for a taxation year of a trust in respect of such part of an amount that would otherwise be its income for the year as became payable in the year to a beneficiary who was, at any time in the year, a designated beneficiary of the trust (as that expression applies for the purposes of section 210.3) unless, throughout the year, the trust was resident in Canada.
Marginal note:Capital interest greater than income interest
(7.1) Where it is reasonable to consider that one of the main purposes for the existence of any term, condition, right or other attribute of an interest in a trust (other than a personal trust) is to give a beneficiary a percentage interest in the property of the trust that is greater than the beneficiary’s percentage interest in the income of the trust, no amount may be deducted under paragraph 104(6)(b) in computing the income of the trust.
Marginal note:Avoidance of s. (7.1)
(7.2) Notwithstanding any other provision of this Act, where
(a) a taxpayer has acquired a right to or to acquire an interest in a trust, or a right to or to acquire a property of a trust, and
(b) it is reasonable to consider that one of the main purposes of the acquisition was to avoid the application of subsection 104(7.1) in respect of the trust,
on a disposition of the right (other than pursuant to the exercise thereof), the interest or the property, there shall be included in computing the income of the taxpayer for the taxation year in which the disposition occurs the amount, if any, by which
(c) the proceeds of disposition of the right, interest or property, as the case may be,
exceed
(d) the cost amount to the taxpayer of the right, interest or property, as the case may be.
Marginal note:Where property owned for non-residents
(10) Where all the property of a trust is owned by the trustee for the benefit of non-resident persons or their unborn issue, in addition to the amount that may be deducted under subsection 104(6), there may be deducted in computing the income of the trust for a taxation year for the purposes of this Part, such part of the dividends and interest received by the trust in a year from a non-resident-owned investment corporation as are not deductible under that subsection in computing the income of the trust for the year.
Marginal note:Dividend received from non-resident-owned investment corporation
(11) Where any part of the dividends received in a taxation year by a trust described in subsection 104(10) from a non-resident-owned investment corporation are deductible under that subsection in computing the income of the trust for the year, for the purposes of Part XIII the trust shall be deemed to have paid to a non-resident person on the last day of the year an amount equal to that part, as income of the non-resident person from the trust.
Marginal note:Deduction of amounts included in preferred beneficiaries’incomes
(12) There may be deducted in computing the income of a trust for a taxation year the lesser of
(a) the total of all amounts designated under subsection 104(14) by the trust in respect of the year, and
(b) the accumulating income of the trust for the year.
Marginal note:Income of beneficiary
(13) There shall be included in computing the income for a particular taxation year of a beneficiary under a trust such of the following amounts as are applicable:
(a) in the case of a trust (other than a trust referred to in paragraph (a) of the definition trust in subsection 108(1)), such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as became payable in the trust’s year to the beneficiary; and
(b) in the case of a trust governed by an employee benefit plan to which the beneficiary has contributed as an employer, such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as was paid in the trust’s year to the beneficiary.
Marginal note:Amounts deemed not paid
(13.1) Where a trust, in its return of income under this Part for a taxation year throughout which it was resident in Canada and not exempt from tax under Part I by reason of subsection 149(1), designates an amount in respect of a beneficiary under the trust, not exceeding the amount determined by the formula
A/B × (C - D - E)
where
- A
- is the beneficiary’s share of the income of the trust for the year computed without reference to this Act,
- B
- is the total of all amounts each of which is a beneficiary’s share of the income of the trust for the year computed without reference to this Act,
- C
- is the total of all amounts each of which is an amount that, but for this subsection or subsection 104(13.2), would be included in computing the income of a beneficiary under the trust by reason of subsection 104(13) or 105(2) for the year,
- D
- is the amount deducted under subsection 104(6) in computing the income of the trust for the year, and
- E
- is equal to the amount determined by the trust for the year and used as the value of C for the purposes of the formula in subsection 104(13.2) or, if no amount is so determined, nil,
the amount so designated shall be deemed, for the purposes of subsections 104(13) and 105(2), not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust.
Marginal note:Idem
(13.2) Where a trust, in its return of income under this Part for a taxation year throughout which it was resident in Canada and not exempt from tax under Part I by reason of subsection 149(1), designates an amount in respect of a beneficiary under the trust, not exceeding the amount determined by the formula
A/B × C
where
- A
- is the amount designated by the trust for the year in respect of the beneficiary under subsection 104(21),
- B
- is the total of all amounts each of which has been designated for the year in respect of a beneficiary of the trust under subsection 104(21), and
- C
- is the amount determined by the trust and used in computing all amounts each of which is designated by the trust for the year under this subsection, not exceeding the amount by which
(i) the total of all amounts each of which is an amount that, but for this subsection or subsection 104(13.1), would be included in computing the income of a beneficiary under the trust by reason of subsection 104(13) or 105(2) for the year
exceeds
(ii) the amount deducted under subsection 104(6) in computing the income of the trust for the year,
the amount so designated shall
(a) for the purposes of subsections 104(13) and 105(2) (except in the application of subsection 104(13) for the purposes of subsection 104(21)), be deemed not to have been paid or to have become payable in the year to or for the benefit of the beneficiaries or out of income of the trust; and
(b) except for the purposes of subsection 104(21) as it applies for the purposes of subsections 104(21.1) and 104(21.2), reduce the amount of the taxable capital gains of the beneficiary otherwise included in computing the beneficiary’s income for the year by reason of subsection 104(21).
Marginal note:Election by trust and preferred beneficiary
(14) Where a trust and a preferred beneficiary under the trust for a particular taxation year of the trust jointly so elect in respect of the particular year in prescribed manner, such part of the accumulating income of the trust for the particular year as is designated in the election, not exceeding the allocable amount for the preferred beneficiary in respect of the trust for the particular year, shall be included in computing the income of the preferred beneficiary for the beneficiary’s taxation year in which the particular year ended and shall not be included in computing the income of any beneficiary of the trust for a subsequent taxation year.
Marginal note:Late, amended or revoked election
(14.01) A trust and a preferred beneficiary under the trust may jointly make an election, or amend or revoke an election made, under subsection 104(14) where the election, amendment or revocation
(a) is made solely because of an election or revocation to which subsection 110.6(25), 110.6(26) or 110.6(27) applies; and
(b) is filed in prescribed manner with the Minister when the election or revocation referred to in paragraph 104(14.01)(a) is filed.
Marginal note:Late, amended or revoked election
(14.02) Where a trust and a preferred beneficiary under the trust have made an election or amended or revoked an election in accordance with subsection 104(14.01),
(a) the election or the amended election, as the case may be, is deemed to have been made on time for the purpose of subsection 104(14); and
(b) the election that was revoked is deemed, otherwise than for the purposes of this subsection and subsection 104(14.01), never to have been made.
Marginal note:NISA election
(14.1) Where, at the end of the day on which a taxpayer dies and as a consequence of the death, an amount would, but for this subsection, be deemed by subsection 104(5.1) to have been paid to a trust out of the trust’s interest in a NISA Fund No. 2 and the trust and the legal representative of the taxpayer so elect in prescribed manner, such portion of the amount as is designated in the election shall be deemed to have been paid to the taxpayer out of a NISA Fund No. 2 of the taxpayer immediately before the end of the day and, for the purpose of paragraph (a) of the description of B in subsection 12(10.2) in respect of the trust, the amount shall be deemed to have been paid out of the trust’s NISA Fund No. 2 immediately before the end of the day.
Marginal note:Allocable amount for preferred beneficiary
(15) For the purpose of subsection 104(14), the allocable amount for a preferred beneficiary under a trust in respect of the trust for a taxation year is
(a) where the trust is an alter ego trust, a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1) at the end of the year and a beneficiary, referred to in paragraph (4)(a) or in that definition, is alive at the end of the year, an amount equal to
(i) if the preferred beneficiary is a beneficiary so referred to, the trust’s accumulating income for the year, and
(ii) in any other case, nil;
(b) where paragraph (a) does not apply and the preferred beneficiary’s interest in the trust is not solely contingent on the death of another beneficiary who has a capital interest in the trust and who does not have an income interest in the trust, the trust’s accumulating income for the year; and
(c) in any other case, nil.
Marginal note:SIFT deemed dividend
(16) If an amount (in this subsection and section 122 referred to as the trust’s non-deductible distributions amount for the taxation year) is determined under subparagraph (6)(b)(iv) in respect of a SIFT trust for a taxation year
(a) each beneficiary under the SIFT trust to whom at any time in the taxation year an amount became payable by the trust is deemed to have received at that time a taxable dividend that was paid at that time by a taxable Canadian corporation;
(b) the amount of a dividend described in paragraph (a) as having been received by a beneficiary at any time in a taxation year is equal to the amount determined by the formula
A/B × C
where
- A
- is the amount that became payable at that time by the SIFT trust to the beneficiary,
- B
- is the total of all amounts, each of which became payable in the taxation year by the SIFT trust to a beneficiary under the SIFT trust, and
- C
- is the SIFT trust’s non-deductible distributions amount for the taxation year;
(c) the amount of a dividend described in paragraph (a) in respect of a beneficiary under the SIFT trust is deemed for the purpose of subsection (13) not to be an amount payable to the beneficiary; and
(d) for the purposes of applying Part XIII in respect of each dividend described in paragraph (a), the SIFT trust is deemed to be a corporation resident in Canada that paid the dividend.
Marginal note:Trust for minor
(18) Where any part of the amount that, but for subsections 104(6) and 104(12), would be the income of a trust for a taxation year throughout which it was resident in Canada
(a) has not become payable in the year,
(b) was held in trust for an individual who did not attain 21 years of age before the end of the year,
(c) the right to which vested at or before the end of the year otherwise than because of the exercise by any person of, or the failure of any person to exercise, any discretionary power, and
(d) the right to which is not subject to any future condition (other than a condition that the individual survive to an age not exceeding 40 years),
notwithstanding subsection 104(24), that part of the amount is, for the purposes of subsections 104(6) and 104(13), deemed to have become payable to the individual in the year.
Marginal note:Taxable dividends
(19) Such portion of a taxable dividend received by a trust in a taxation year throughout which it was resident in Canada on a share of the capital stock of a taxable Canadian corporation as
(a) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that, by reason of subsection 104(13) or 104(14) or section 105, as the case may be, was included in computing the income for a particular taxation year of a beneficiary under the trust, and
(b) was not designated by the trust in respect of any other beneficiary under the trust
is, if so designated by the trust in respect of the beneficiary in its return of income for the year, deemed, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, not to have been received by the trust, and for the purposes of this Act (other than Part XIII), to be a taxable dividend on the share received by the beneficiary in the particular year from the corporation.
Marginal note:Designation in respect of non-taxable dividends
(20) The portion of the total of all amounts, each of which is the amount of a dividend (other than a taxable dividend) paid on a share of the capital stock of a corporation resident in Canada to a trust during a taxation year of the trust throughout which the trust was resident in Canada, that can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of an amount that became payable in the year to a particular beneficiary under the trust shall be designated by the trust in respect of the particular beneficiary in the return of the trust’s income for the year for the purposes of subclause 53(2)(h)(i.1)(B)(II), paragraphs 107(1)(c) and 107(1)(d) and subsections 112(3.1), 112(3.2), 112(3.31) and 112(4.2).
Marginal note:Taxable capital gains
(21) Such portion of the net taxable capital gains of a trust for a taxation year throughout which it was resident in Canada as
(a) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that, by virtue of subsection 104(13) or 104(14) or section 105, as the case may be, was included in computing the income for the taxation year of
(i) a particular beneficiary under the trust, if the trust is a mutual fund trust, or
(ii) a particular beneficiary under the trust who is resident in Canada, if the trust is not a mutual fund trust, and
(b) was not designated by the trust in respect of any other beneficiary under the trust,
shall, if so designated by the trust in respect of the particular beneficiary in the return of its income for the year under this Part, be deemed, for the purposes of sections 3 and 111, except as they apply for the purpose of section 110.6, and subject to paragraph 132(5.1)(b), to be a taxable capital gain for the year of the particular beneficiary from the disposition by that beneficiary of capital property.
Marginal note:Late, amended or revoked designation
(21.01) A trust that has filed its return of income for its taxation year that includes February 22, 1994 may subsequently designate an amount under subsection 104(21), or amend or revoke a designation made under that subsection where the designation, amendment or revocation
(a) is made solely because of an increase or decrease in the net taxable capital gains of the trust for the year that results from an election or revocation to which subsection 110.6(25), 110.6(26) or 110.6(27) applies; and
(b) is filed with the Minister, with an amended return of income for the year, when the election or revocation referred to in paragraph 104(21.01)(a) is filed with the Minister.
Marginal note:Late, amended or revoked designation
(21.02) A designation, amendment or revocation under subsection 104(21.01) that affects an amount determined in respect of a beneficiary under subsection 104(21.2) may be made only where the trust
(a) designates an amount, or amends or revokes a designation made, under subsection 104(21.2) in respect of the beneficiary; and
(b) files the designation, amendment or revocation referred to in paragraph 104(21.02)(a) with the Minister when required by paragraph 104(21.01)(b).
Marginal note:Late, amended or revoked designation
(21.03) Where a trust designates an amount, or amends or revokes a designation, under subsection 104(21) or 104(21.2) in accordance with subsection 104(21.01),
(a) the designation or amended designation, as the case may be, is deemed to have been made in the trust’s return of income for the trust’s taxation year that includes February 22, 1994; and
(b) the designation that was revoked is deemed, other than for the purposes of this subsection and subsections 104(21.01) and 104(21.02), never to have been made.
Marginal note:Beneficiary’s taxable capital gain
(21.1) Notwithstanding subsection 104(21) or section 38, where in a particular taxation year, commencing before 1990, of a taxpayer (other than an individual who is not a testamentary trust) the taxpayer is a beneficiary of a trust with a taxation year ending in the particular year, the amount (other than that part of the amount that can be attributed to an amount deemed under subsection 14(1) to be a taxable capital gain of the trust) deemed by subsection 104(21) to be a taxable capital gain of the taxpayer for the particular year in respect of the trust shall be the amount determined by the formula
A × B/C
where
- A
- is the amount, if any, by which the amount (other than that part of the amount that can be attributed to an amount deemed under subsection 14(1) to be a taxable capital gain of the trust) deemed by subsection 104(21) to be the taxpayer’s taxable capital gain for the particular year in respect of the trust exceeds the amount (other than that part of the amount that can be attributed to an amount deemed under subsection 14(1) to be a taxable capital gain of the trust) designated by the trust for the particular year in respect of the taxpayer under subsection 104(13.2);
- B
- is the fraction that would be used under section 38 for the particular year in respect of the taxpayer if the taxpayer had a capital gain for the particular year; and
- C
- is the fraction that is used under section 38 for the year of the trust.
Marginal note:Beneficiaries’ taxable capital gain
(21.2) Where, for the purposes of subsection (21), a personal trust or a trust referred to in subsection 7(2) designates an amount in respect of a beneficiary in respect of its net taxable capital gains for a taxation year (in this subsection referred to as the “designation year”),
(a) the trust shall in its return of income under this Part for the designation year designate an amount in respect of its eligible taxable capital gains, if any, for the designation year in respect of the beneficiary equal to the amount determined in respect of the beneficiary under each of subparagraphs 104(21.2)(b)(i) and 104(21.2)(b)(ii); and
(b) the beneficiary is, for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of section 110.6,
(i) deemed to have disposed of the capital property referred to in clause (ii)(A), (B) or (C) if a taxable capital gain is determined in respect of the beneficiary for the beneficiary’s taxation year in which the designation year ends under those clauses, and
(ii) deemed to have a taxable capital gain for the beneficiary’s taxation year in which the designation year ends
(A) from a disposition of a capital property that is qualified farm property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × C)/(D × E)
(B) from a disposition of a capital property that is a qualified small business corporation share (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × F)/(D × E)
and
(C) from a disposition of a capital property that is a qualified fishing property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × I)/(D × E)
where
- A
- is the lesser of
(I) the amount determined by the formula
G - H
where
- G
- is the total of amounts designated under subsection (21) for the designation year by the trust, and
- H
- is the total of amounts designated under subsection (13.2) for the designation year by the trust, and
(II) the trust’s eligible taxable capital gains for the designation year,
- B
- is the amount, if any, by which the amount designated under subsection (21) for the designation year by the trust in respect of the beneficiary exceeds the amount designated under subsection (13.2) for the year by the trust in respect of the beneficiary for the taxation year,
- C
- is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the trust disposed of by it after 1984,
- D
- is the total of all amounts each of which is the amount determined for B for the designation year in respect of a beneficiary under the trust,
- E
- is the total of the amounts determined for C, F and I for the designation year in respect of the beneficiary,
- F
- is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust, other than qualified farm property, disposed of by it after June 17, 1987, and
- I
- is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the trust disposed of by it on or after May 2, 2006,
and for the purposes of section 110.6, those capital properties shall be deemed to have been disposed of by the beneficiary in that taxation year of the beneficiary.
Marginal note:Net taxable capital gains of trust determined
(21.3) For the purposes of this section, the net taxable capital gains of a trust for a taxation year is the amount, if any, by which the total of the taxable capital gains of the trust for the year exceeds the total of
(a) its allowable capital losses for the year, and
(b) the amount, if any, deducted under paragraph 111(1)(b) in computing its taxable income for the year.
Marginal note:Deemed gains
(21.4) Where an amount is designated in respect of a beneficiary by a trust for a particular taxation year of the trust that includes February 28, 2000 or October 17, 2000 and that amount is, because of subsection (21), deemed to be a taxable capital gain of the beneficiary from the disposition of capital property for the taxation year of the beneficiary in which the particular taxation year of the trust ends (in this subsection referred to as the “allocated gain”),
(a) the beneficiary is deemed to have realized capital gains (in this subsection referred to as the “deemed gains”) from the disposition of capital property in the beneficiary’s taxation year in which the particular taxation year ends equal to the amount, if any, by which
(i) the amount determined when the amount of the allocated gain is divided by the fraction in paragraph 38(a) that applies to the trust for the particular taxation year
exceeds
(ii) the amount claimed by the beneficiary not exceeding the beneficiary’s exempt capital gains balance for the year in respect of the trust;
(b) notwithstanding subsection (21) and except as a consequence of the application of paragraph (a), the amount of the allocated gain shall not be included in computing the beneficiary’s income for the beneficiary’s taxation year in which the particular taxation year ends;
(c) the trust shall disclose to the beneficiary in prescribed form the portion of the deemed gains that are in respect of capital gains realized on dispositions of property that occurred before February 28, 2000, after February 27, 2000 and before October 18, 2000, and after October 17, 2000 and, if it does not do so, the deemed gains are deemed to be in respect of capital gains realized on dispositions of property that occurred before February 28, 2000;
(d) where a trust so elects under this paragraph in its return of income for the year,
(i) the portion of the deemed gains that are in respect of capital gains from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the deemed gains that the number of days that are in the particular year and before February 28, 2000 is of the number of days that are in the particular year,
(ii) the portion of the deemed gains that are in respect of capital gains from dispositions of property that occurred in the year and in the period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000, is deemed to be that proportion of the deemed gains that the number of days that are in the year and in that period is of the number of days that are in the particular year, and
(iii) the portion of the deemed gains that are in respect of capital gains from dispositions of property that occurred in the year and in the period that begins at the beginning of October 18, 2000 and ends at the end of the particular year, is deemed to be that proportion of the deemed gains that the number of days that are in the year and in that period is of the number of days that are in the particular year; and
(e) no amount may be claimed by the beneficiary under subsection 39.1(3) in respect of the allocated gain.
Marginal note:Deemed gains
(21.5) Where no amount is designated by a trust under subsection (21) in respect of its net taxable capital gains for a taxation year that includes February 28, 2000 or October 17, 2000, the trust has net capital gains or net capital losses from the disposition of property in the year and the trust so elects under this subsection in its return of income for the year,
(a) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and before February 28, 2000 is of the number of days that are in the year,
(b) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000, is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and in that period is of the number of days that are in the year, and
(c) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of October 18, 2000 and ended at the end of the year, is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and in that period is of the number of days that are in the year,
and, for the purpose of this subsection,
(d) the net capital gains of a trust from dispositions of property in a year is the amount, if any, by which the trust’s capital gains from dispositions of property in the year exceeds the trust’s capital losses from dispositions of property in the year, and
(e) the net capital losses of a trust from dispositions of property in a year is the amount, if any, by which the trust’s capital losses from dispositions of property in the year exceeds the trust’s capital gains from dispositions of property in the year.
Marginal note:Deemed gains — subsection (21.4) applies
(21.6) Where a taxpayer is deemed by subsection (21.4) to have realized capital gains from the disposition of capital property in a taxation year of the taxpayer in respect of dispositions of property by a trust of which the taxpayer is a beneficiary,
(a) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer includes February 27, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before February 28, 2000;
(b) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18, 2000, 9/8 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(c) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended after October 17, 2000, 9/8 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before October 18, 2000;
(d) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer began after October 17, 2000, 3/2 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(e) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 18, 2000, and the taxation year of the taxpayer began after October 17, 2000, 4/3 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(f) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 18, 2000 and the taxation year of the taxpayer includes February 28, 2000 and October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and in the period that began after February 27, 2000 and ended before October 18, 2000;
(g) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year; and
(h) in any other case, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition of capital property by the taxpayer in the taxpayer’s taxation year and after October 17, 2000.
Marginal note:Deemed gains — subsection (21.4) does not apply
(21.7) Where an amount is designated under subsection (21) in respect of a beneficiary by a trust for a particular taxation year of the trust that ends in a taxation year of the beneficiary that includes February 28, 2000 or October 17, 2000 and subsection (21.4) does not apply in respect of the designated amount,
(a) notwithstanding subsection (21) and except as a consequence of the application of paragraph (b), the designated amount shall not be included in computing the beneficiary’s income;
(b) the beneficiary is deemed to have a capital gain from the disposition by the beneficiary of capital property on the day on which the particular taxation year ends equal to the amount, if any, by which
(i) the amount determined by dividing the designated amount by the fraction in paragraph 38(a) that applies to the trust for the particular taxation year
exceeds
(ii) the amount claimed by the beneficiary, which amount may not be greater than the beneficiary’s exempt capital gains balance for the year in respect of the trust; and
(c) no amount may be claimed under subsection 39.1(3) by the beneficiary in respect of the designated amount.
Marginal note:Designation of foreign source income by trust
(22) For the purposes of this subsection, subsection 104(22.1) and section 126, such portion of a trust’s income for a taxation year (in this subsection referred to as “that year”) throughout which it is resident in Canada from a source in a country other than Canada as
(a) can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the income that, because of subsection 104(13) or 104(14), was included in computing the income for a particular taxation year of a particular beneficiary under the trust, and
(b) is not designated by the trust in respect of any other beneficiary thereunder
shall, if so designated by the trust in respect of the particular beneficiary in its return of income under this Part for that year, be deemed to be the particular beneficiary’s income for the particular year from that source.
Marginal note:Foreign tax deemed paid by beneficiary
(22.1) Where a taxpayer is a beneficiary under a trust, for the purposes of this subsection and section 126, the taxpayer shall be deemed to have paid as business-income tax or non-business-income tax, as the case may be, for a particular taxation year in respect of a source the amount determined by the formula
A × B/C
where
- A
- is the amount that, but for subsection 104(22.3), would be the business-income tax or non-business-income tax, as the case may be, paid by the trust in respect of the source for a taxation year (in this subsection referred to asthat year) of the trust that ends in the particular year;
- B
- is the amount deemed, because of a designation under subsection 104(22) for that year by the trust, to be the taxpayer’s income from the source; and
- C
- is the trust’s income for that year from the source.
Marginal note:Recalculation of trust’s foreign source income
(22.2) For the purpose of section 126, there shall be deducted in computing a trust’s income from a source for a taxation year the total of all amounts deemed, because of designations under subsection 104(22) by the trust for the year, to be income of beneficiaries under the trust from that source.
Marginal note:Recalculation of trust’s foreign tax
(22.3) For the purpose of section 126, there shall be deducted in computing the business-income tax or non-business-income tax paid by a trust for a taxation year in respect of a source the total of all amounts deemed, because of designations under subsection 104(22) by the trust for the year, to be paid by beneficiaries under the trust as business-income tax or non-business-income tax, as the case may be, in respect of the source.
Marginal note:Definitions
(22.4) For the purposes of subsections 104(22) to 104(22.3), the expressions business-income tax and non-business-income tax have the meanings assigned by subsection 126(7).
Marginal note:Testamentary trusts
(23) In the case of a testamentary trust, notwithstanding any other provision of this Act, the following rules apply:
(a) the taxation year of the trust is the period for which the accounts of the trust are made up for purposes of assessment under this Act, but no such period may exceed 12 months and no change in the time when such a period ends may be made for the purposes of this Act without the concurrence of the Minister;
(b) when a taxation year is referred to by reference to a calendar year, the reference is to the taxation year or years coinciding with, or ending in, that year;
(c) the income of a person for a taxation year from the trust shall be deemed to be the person’s benefits from or under the trust for the taxation year or years of the trust that ended in the year determined as provided by this section and section 105;
(d) where an individual having income from the trust died after the end of a taxation year of the trust but before the end of the calendar year in which the taxation year ended, the individual’s income from the trust for the period commencing immediately after the end of the taxation year and ending at the time of death shall be included in computing the individual’s income for the individual’s taxation year in which the individual died unless the individual’s legal representative has elected otherwise, in which case the legal representative shall file a separate return of income for the period under this Part and pay the tax for the period under this Part as if
(i) the individual were another person,
(ii) the period were a taxation year,
(iii) that other person’s only income for the period were the individual’s income from the trust for that period, and
(iv) subject to sections 114.2 and 118.93, that other person were entitled to the deductions to which the individual was entitled under sections 110, 118 to 118.7 and 118.9 for the period in computing the individual’s taxable income or tax payable under this Part, as the case may be, for the period; and
(e) in lieu of making the payments required by sections 155, 156 and 156.1, the trust shall pay to the Receiver General within 90 days after the end of each taxation year, the tax payable under this Part by it for the year.
Marginal note:Amount payable
(24) For the purposes of subsections (6), (7), (13), (16) and (20) and subparagraph 53(2)(h)(i.1), an amount is deemed not to have become payable to a beneficiary in a taxation year unless it was paid in the year to the beneficiary or the beneficiary was entitled in the year to enforce payment of it.
Marginal note:Pension benefits
(27) Where a testamentary trust has, in a taxation year throughout which it was resident in Canada, received a superannuation or pension benefit or a benefit out of or under a foreign retirement arrangement and has designated, in the return of its income for the year under this Part, an amount in respect of a beneficiary under the trust equal to such portion (in this subsection referred to as the “beneficiary’s share”) of the benefit as
(a) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that, by reason of subsection 104(13), was included in computing the income for a particular taxation year of the beneficiary, and
(b) was not designated by the trust in respect of any other beneficiary under the trust,
the following rules apply:
(c) where
(i) the benefit is an amount described in subparagraph (a)(i) of the definition pension income in subsection 118(7), and
(ii) the beneficiary was a spouse or common-law partner of the settlor of the trust,
the beneficiary’s share of the benefit shall be deemed, for the purposes of subsections 118(3) and 118(7), to be a payment described in subparagraph (a)(i) of the definition pension income in subsection 118(7) that is included in computing the beneficiary’s income for the particular year,
(d) where the benefit
(i) is a single amount (within the meaning assigned by subsection 147.1(1)), other than an amount that relates to an actuarial surplus, paid by a registered pension plan to the trust as a consequence of the death of the settlor of the trust who was, at the time of death, a spouse or common-law partner of the beneficiary, or
(ii) would be an amount included in the total determined under paragraph 60(j) in respect of the beneficiary for the taxation year of the beneficiary in which the benefit was received by the trust if the benefit had been received by the beneficiary at the time it was received by the trust,
the beneficiary’s share of the benefit is, for the purposes of paragraph 60(j), an eligible amount in respect of the beneficiary for the particular year, and
(e) where the benefit is a single amount (within the meaning assigned by subsection 147.1(1)) paid by a registered pension plan to the trust as a consequence of the death of the settlor of the trust,
(i) if the beneficiary was, immediately before the settlor’s death, a child or grandchild of the settlor who, because of mental or physical infirmity, was financially dependent on the settlor for support, the beneficiary’s share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary’s income for the particular year as a payment described in clause 60(l)(v)(B.01), and
(ii) if the beneficiary was, at the time of the settlor’s death, under 18 years of age and a child or grandchild of the settlor, the beneficiary’s share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary’s income for the particular year as a payment described in subclause 60(l)(v)(B.1)(II).
Marginal note:DPSP benefits
(27.1) Where
(a) a testamentary trust has received in a taxation year (in this subsection referred to as the “trust year”) throughout which it was resident in Canada an amount from a deferred profit sharing plan as a consequence of the death of the settlor of the trust,
(b) the settlor was an employee of an employer who participated in the plan on behalf of the settlor, and
(c) the amount is not part of a series of periodic payments,
such portion of the amount as
(d) is included under subsection 147(10) in computing the income of the trust for the trust year,
(e) can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that was included under subsection 104(13) in computing the income for a particular taxation year of a beneficiary under the trust who was, at the time of the settlor’s death, a spouse or common-law partner of the settlor, and
(f) is designated by the trust in respect of the beneficiary in the trust’s return of income under this Part for the trust year
is, for the purposes of paragraph 60(j), an eligible amount inrespect of the beneficiary for the particular year.
Marginal note:Idem
(28) Such portion of any amount received by a testamentary trust in a taxation year on or after the death of an employee in recognition of the employee’s service in an office or employment as may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be paid or payable at a particular time to a particular beneficiary under the trust shall be deemed to be an amount received by the particular beneficiary at the particular time on or after the death of the employee in recognition of the employee’s service in an office or employment and not to have been received by the trust.
(29) [Repealed, 2003, c. 28, s. 11(2)]
Marginal note:Tax under Part XII.2
(30) For the purposes of this Part, there shall be deducted in computing the income of a trust for a taxation year the tax paid by the trust for the year under Part XII.2.
Marginal note:Idem
(31) The amount in respect of a taxation year of a trust that is deemed under subsection 210.2(3) to have been paid by a beneficiary under the trust on account of the beneficiary’s tax under this Part shall, for the purposes of subsection 104(13), be deemed to be an amount in respect of the income of the trust for the year that has become payable by the trust to the beneficiary at the end of the year.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 104
- 1994, c. 7, Sch. II, s. 75, Sch. VIII, s. 42, c. 8, s. 12, c. 21, s. 46
- 1995, c. 3, s. 28
- 1996, c. 21, s. 18
- 1998, c. 19, s. 127
- 2000, c. 12, s. 142
- 2001, c. 17, s. 78
- 2003, c. 15, s. 72, c. 28, s. 11
- 2005, c. 19, s. 17
- 2007, c. 2, s. 15, c. 29, s. 8
- Date modified: