Principal Issues: [TaxInterpretations translation]
1) What are the filing deadlines for the T3 return for mutual fund trusts following a qualifying exchange under subsection 132.2(1) of the Act where:
a mutual fund trust continues as a result of the qualifying exchange; and
a mutual fund trust disappears in connection with the exchange.
2) Does the Commentary for Question 11 in the "Other necessary information" section of Chapter 2 of the T4013 guide apply to all mutual fund trusts?
Position: 1a) 90 days 1b) 30 days 2) No
Reasons:
1) Interpretation of the Act and Regulations.
2) Mutual fund trusts that are "public trusts" are subject to the rules in Regulation 204.1.
XXXXXXXXXX 2009-032788 Danielle Bouffard
June 30, 2010
Dear Madam,
Subject: Filing deadline for a "T3 Trust Income Tax and Information Return".
This is in response to your email of June 17, 2009 in which you requested our opinion regarding the filing deadlines for the T3 return for mutual fund trusts following a qualifying exchange under subsection 132.2(1) of the Income Tax Act (the "Act") where:
a) a mutual fund trust continues as a result of the qualifying exchange;
b) a mutual fund trust disappears in connection with the exchange.
In addition, you asked us to clarify whether the commentary for Question 11 in the "Other required information" section of Chapter 2 of the T4013 guide applies to all mutual fund trusts. Question 11 in the "Other required information" section on page 2 of the T3 return and the commentary in the Guide reads as follows:
11. Does the trust qualify as a public trust or public investment trust that has to post information about the trust on the CDS Innovations Inc Web site under section 204.1 of the Income Tax Regulations?
Guide T4013 "Other required information”
Answer all the questions on page 2. The following information will help you answer some of these questions.
Question 11 - A yes answer to this question applies only to mutual fund trusts.
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, it is the practice of the Canada Revenue Agency (CRA) not to issue written opinions on proposed transactions otherwise than through advance income tax rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope you will find useful. These comments, however, may not apply to your particular situation in certain circumstances.
T3 Return Filing Deadlines
Where a mutual fund trust disposed of a property to another mutual fund trust in a qualifying exchange, the last taxation year of both trusts that began before the transfer time is deemed to have ended at the acquisition time, as set out in paragraph 132.2(1)(b).
The T3 return of the trust that continues following the qualifying exchange must be filed, under paragraph 150(1)(c) of the Act and subsection 204(2) of the Regulations, within 90 days after that taxation year-end. The T3 return for any trust that ceases to exist as a result of a qualifying exchange must be filed within 30 days after the cessation of its business or activity. Subsection 205(2) of the Income Tax Regulations (the "Regulations") states that where a person required to make a return under Part II of the Regulations discontinues the person’s business or activity, the return shall be filed within 30 days of the day of the discontinuance of the business or activity.
However, the CRA has agreed, as a matter of administrative policy (footnote 1), to consider on an individual basis any request for an extension of the filing deadline for, among other things, the T3 return, following a combination of entities that are mutual fund trusts. In order to obtain this extension, the trustee or “manager” of the entities involved must prepare the request by filing the following information:
- Reasons for the request for an extension of time to file.
- Names of the entities involved with their identification number, the date of the consolidation, and the date the CRA can expect to receive the returns.
- An Indication of whether the consolidation is a "qualifying exchange" as defined in subsection 132.2(2) and whether the election under paragraph (c) of that definition has been made.
In addition, the applicant must agree:
- for each of the mutual fund trusts that is part of the consolidation, to file the T3 returns, T3 summaries, etc., on or before the date indicated in the letter granting the extension, which cannot be later than the filing date that would have been requested in the absence of the consolidation.
- to identify each T3 return when it is filed as either the transferor trust's or the transferee trust's return.
- to indicate whether, as a result of the consolidation, a new transferee trust has been created instead of a continuation of an existing trust.
- to attach a copy of the letter approving the application to each of the relevant statements.
- to provide the CRA with details of the “categories” of income and capital gains of the various underlying funds; and
- that the granting of the extension does not, under any circumstances, create a year-end for an entity.
A request for an extension of the time limit should be forwarded to the attention of the Assistant Director of Audit of the trustee's or manager's Tax Services Office (TSO). The TSO will review the request and provide a response.
Other Required Information - Question 11
The terms "public investment trust" and "public trust" are defined in subsection 204.1(1) of the Regulations as follows:
“public investment trust”, at any time, means a public trust all or substantially all of the fair market value of the property of which is, at that time, attributable to the fair market value of property of the trust that is
(a) units of public trusts;
(b) partnership interests in public partnerships (as defined in subsection 229.1(1));
(c) shares of the capital stock of public corporations; or
(d) any combination of properties referred to in paragraphs (a) to (c).
“public trust”, at any time, means a mutual fund trust the units of which are, at that time, listed on a designated stock exchange in Canada.
Under the provisions of Regulation 204.1, certain trusts are required to make public information in respect of the trust by posting a prescribed form on the CDS Innovations Inc. website within the time limits set out in subsection 204.1(3) of the Regulation.
In light of the foregoing, only mutual fund trusts that are "public trusts" are subject to the rules in Regulation 204.1. If the units of the mutual fund trust are not listed on a designated stock exchange in Canada, then the answer to question 11 is "no".
We hope that these comments are of assistance.
Best regards,
Alain Godin
for the Director
International Operations and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
FOOTNOTES
1 Translation of a letter dated May 5, 2004, prepared by the Technical Applications and Valuation Division, Industry Specialist Services, Financial Industries.