Principal Issues: [TaxInterpretations translation] Does a trust that only holds property subject to subsection 75(2) that does not produce income have to file a T3 return under the current administrative position?
Position: We are of the view that a person who holds a property subject to subsection 75(2) as a trustee will not have to complete the T3 return for a taxation year where such trustee does not control or receive any income, gains, or profits in that taxation year.
Reasons: Legislative analysis.
FEDERAL TAX ROUNDTABLE
APFF CONFERENCE 2010
Question 48
Filing trust income tax and information returns - T3
(a) Trust subject to 75(2).
CRA's administrative policy (footnote 1) states that a T3 Trust Income Tax and Information Return ("T3 Return") is required if the income from property of the trust is taxable and if the trust meets, in the taxation year, one of the conditions listed in the Guide. One of those conditions is the holding of property that is subject to subsection 75(2).
At the APFF Conference 2006 Federal Tax Roundtable (footnote 2), the CRA was asked whether a T3 return should be filed where all income is subject to subsection 75(2). The CRA responded that a T3 return must be filed because filing is required by both paragraph 150(1)(c), subject to subsection 150(1.1), and because it is an information return required to be filed under section 204.
Section 204 reads as follows:
“Every person having the control of, or receiving income, gains or profits in a fiduciary capacity, or in a capacity analogous to a fiduciary capacity, shall make a return in prescribed form in respect thereof.” (our emphasis)
The prescribed form referred to is the T3 Return.
Question to the CRA
Can the CRA confirm that a trust that only holds property subject to 75(2) that does not generate income would not be required to file a T3 return under the current administrative position?
(b) Other Trust
The T3 Return is both an income tax return required to be filed under paragraph 150(1)(c) (subject to subsection 150(1.1)) and an information return required to be filed under ITR section 204.
Paragraph 150(1.1)(b) provides certain circumstances in which a trust is not required to file a T3 return as an income tax return, including where the trust has no tax payable and no capital gains. However, those exceptions do not apply for the purposes of ITR section 204. As an administrative measure, the CRA only requires the filing of a T3 return if one of the conditions listed in the Trust Guide (T4013) is met.
Question to the CRA
Can the CRA confirm that, to the extent that the trust does not satisfy any of the conditions listed in the Trust Guide for a taxation year, it does not have to file a T3 return despite having previously filed such a return? For greater certainty, can the CRA confirm that it will not impose any penalty for failure to file a tax return or information return in those circumstances?
CRA's Response to Question 48(a)
ITR subsection 204(1) provides that every person having the control of, or receiving income, gains or profits in a fiduciary capacity, or in a capacity analogous to a fiduciary capacity, shall make a return in prescribed form in respect thereof. The prescribed form includes the T3 Trust Income Tax and Information Return. Under ITR subsection 204(2), that return must be filed within 90 days after the end of the taxation year and shall be in respect of the taxation year.
We are of the view that a person who holds qua trustee property that is subject to subsection 75(2) will not be required to complete the T3 return in respect of a taxation year where such trustee does not control or receive any income, gains or profits in that taxation year.
CRA's Response to Question 48(b)
The T3 Trust Guide (T4013(E) Rev. 09) contains under the heading “Who has to file a return?", a list of situations for which the CRA considers that a person be required to file a T3 return for a given taxation year. Some of the situations listed in that Guide have thresholds or limits at which a return must be filed. For example, one situation requires a return to be filed for a taxation year where the total income from the trust's property for that taxation year is more than $500.
Generally, the CRA does not intend to impose a penalty for failure to file an income or information return on a person who has not filed a T3 return for a particular taxation year where none of the situations listed in the T3 Trust Guide (T4013) under the heading "Who has to file a return?" applied to that person for that particular taxation year.
Of course, the filing of a T3 Return can still be requested by the CRA under subsection 150(2).
Isabelle Landry
(450) 623-0193
October 8, 2010
2010-037368.
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 CANADA REVENUE AGENCY, T4013, "T3 Trust Guide 2009", March 22, 2010, p. 12.
2 CANADA REVENUE AGENCY, Technical Interpretation 2006-0196201C6, "T3 Filing", October 6, 2006.