An Ontario inter vivos trust with two trustees (the "Legal Representatives"), timely filed its returns for the taxation years up to 2013, and distributed its assets to its beneficiaries (who resided in Belgium) in 2013. In 2015, it applied for a clearance certificate, which was issued in March 2016. However. As a result of an ARQ audit completed in January 2017, it was determined that the trust had failed to report capital gains realized in 2010 and 2011.
The Directorate stated:
[T]he amounts payable pursuant to this [federal] Act in respect of the Trust's unreported capital gains are subsection 159(2) amounts, regardless of whether they were determined before or after the actual distribution of the property. … [A]n amount does not have to be assessed to be an amount referred to in subsection 159(2). Thus, an assessment in respect of the Trust does not have to be issued in order to assess the Legal Representatives pursuant to subsection 159(3).
… [I]t is reasonable to consider that … the issuance of the clearance certificate by the CRA does not relieve the Legal Representatives of their personal liability pursuant to subsection 159(3). It is all the more important to consider that, at the time of the request to the CRA for the clearance certificate, the Legal Representatives did not disclose any information relating to the undeclared capital gains. …
[P]aragraph 159(3)(b) provides that the Minister may, at any time, assess a legal representative for any amount payable pursuant to that subsection without regard to the normal reassessment period.