///?p=37586#Q7b">19 June 2015 STEP Roundtable, oral Q.7(b)
Assume in January 2005, Mr. X became a non-resident of Canada, in July 2010, he made a contribution to a non-resident trust (the "Trust"), on March 2015, he became a resident of Canada and the Trust has Canadian resident beneficiaries who are not successor beneficiaries (as per s. 94(1)). Will the Trust be deemed to have become a resident trust with retroactive effect to 2010? Would it thereby be responsible for filing tax returns for up to five previous taxation years, furnishing T1134 and T1135s respecting its holdings, and paying income tax on any income of the trust, computed in accordance with Canadian rules, subject to foreign tax credit relief?
CRA noted that as X was non-resident for more than 60 months before the contribution - but returned to Canada within 60 months after the contribution - then s. 94(10) applies to all the post-contribution years, stating:
For the 2015 taxation year of Trust, Mr. X would be considered to have made the contribution to Trust at a time other than a non-resident time since Mr. X was a non-resident for more than 60 months before the contribution time but became resident in Canada within 60 months after the contribution time. As a result, Mr. X would be a connected contributor. Consequently, Trust would have resident beneficiaries, as defined in subsection 94(1). Therefore, Trust would be deemed to be resident in Canada for the 2015 taxation year. …
[S]ubsection 94(10) will deem Mr. X to have made the contribution to Trust at a time other than a non-resident time for each taxation year commencing with the taxation year during which Mr. X made the contribution to the Trust. Therefore, Trust will be deemed to be a trust resident in Canada for each taxation year commencing in 2010. This would result in Trust being deemed resident in Canada pursuant to subsection 94(3) for a total of six taxation years (2010 - 2015 inclusive).
…Trust will be required [by s. 94(3)(a)(vi)] to complete foreign reporting forms (T1135 and T1134), if applicable, for each taxation year commencing in 2010..[and will] be subject to Canadian tax by virtue of paragraph 94(3)(a) for each taxation year commencing in 2010.
Suppose instead that Mr. Z, a previous long term resident of Canada, became a non-resident in January 2007, in July 2010 made a contribution to a non-resident trust (the "Trust2") and in March 2015, became a resident of Canada – and that Trust2 has Canadian resident beneficiaries who are not successor beneficiaries. CRA stated:
[A]t the end of the 2010 taxation year, Trust2 would have a resident beneficiary…as there are beneficiaries of the trust that are resident in Canada and Mr. Z would be considered to be a connected contributor… because at the time the contribution was made, Mr. Z would not have been a non-resident of Canada for a period of 60 months before the contribution was made. Consequently, the contribution would not be considered to have been made at a non-resident time of Mr. Z. As a result, Trust2 would be deemed to be resident in Canada from 2010 onward without any retroactive application.