All About Estates

Filing obligation for 75(2) trust

The Canada Revenue Agency (CRA) was asked in a technical interpretation if a reversionary trust that holds non-income producing property is required to file a T3 Return.

A T3 return serves to report not only information about the reporting trust, but also additional information, such as that affecting the taxation of persons (for example, beneficiaries or settlors) having some connection to the trust.

The tax rule provides that the trust is required to file an income tax return if tax is payable by the trust or the trust disposes of capital property or realizes a capital gain. The tax rule aslo provides that every person having control of or receiving income, gains or profits in a fiduciary capacity must file a return.

According to the CRA, a T3 return is required for a reversionary trust where the trustee computes nil income for the trust for tax purposes because subsection 75(2) applies to attribute income to the person from whom the trust directly or indirectly received the property (or property for which it was substituted).

Conversely, where a person in a fiduciary capacity does not control or receive income, gains or profits during the tax year, they are not required to file a T3 return for that year.

Be sure to file a T3 return when required and avoid the penalties associated for non-filing.

About Derek de Gannes
Derek A. de Gannes: Director, Domestic & International Tax of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: