The Canada Revenue Agency (CRA) recently provided its view on the due date of a trust information and income tax return (T3) in the year a trust is wound up.
Where a trust is wound up by distributing all of its property to its beneficiaries, does the T3 have to be filed within 90 days of the date of wind up date or within 90 days of the calendar year-end?
Depending on the type of trust, the due date of the final trust is one of the following:
- Graduated Rate Estate (GRE) – due date is 90 days from the date of final distribution of its assets
- All other trusts – due date is 90 days from the end of the calendar year in which the wind up occurs, but the trustee can choose to file at an earlier date
- If there is another event in the same year the trust is wound up that may cause a deemed year-end, the filing due date is 90 days after the deemed year-end.
Penalties are applied when a T3 is filed beyond the due date – in addition to penalties calculated as a percentage of the balance of tax due on filing, up to $2,500 may be added in respect of a late information return.
Trustees and personal representatives should take note so as to reduce the exposure to late filing penalties when filing returns for wound up trusts and trusts, in general.