Recently the Canada Revenue Agency (“CRA”) was asked whether income allocated by a communal organization and reported as self employment earnings for CPP eligibility on a trust income tax slip (T3 slip) is considered “working” income for the recipient to claim the Working Income Tax Benefit (“WITB”).
CRA responded that the Income Tax Act generally defines income from a Trust to be income from a property and not any other type or form of income. While the income may be considered self-employment income for the purposes of CPP eligibility, CRA notes it does not alter the fact that it is still considered income from property for income tax purposes, so it does not qualify for a WITB claim.
While CRA was responding to a matter related to a communal organization, deemed to be a Trust for income tax purposes, it is a reminder that the same provisions apply to income from any Trust carrying on a business. As the income from a trust is characterized as property income, it is not eligible for the WITB claim, it does not create contribution room for a RRSP, it does not provide access to child care or moving expense claims, or any other benefits of “earned income” from business or employment.
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