Calendar year for testamentary trusts


Written on March 15, 2016 – 7:00 am | by Derek de Gannes

The Canada Revenue Agency was asked if there is any transitional relief with respect to the legislative changes which require an existing testamentary trust, which will not be a graduated rate estate, to have a taxation year that coincides with the calendar year; commencing with a deemed taxation year of December 31, 2015.

The scenario provided was one where a testamentary trust, having a non-calendar year end, owns shares of a private corporation which has paid dividends on December 31 each year and the trust has habitually allocated this income to its beneficiaries at the trust year end. As a result of the deemed December 31, 2015 year end for existing testamentary trusts, the beneficiaries have to report more than twelve months of income in their 2015 tax year.

The Canada Revenue Agency agreed with the questioner’s take on the rules and confirmed that there would be more than twelve months of income to be reported by the beneficiaries in 2015 (i.e., no transitional relief).

This matter may be front of mind for executors With the deadline for 2015 trust fast approaching near the end of March.

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