S. 233.6(1) provides that foreign reporting (on Form T1142) is not required for a distribution from a foreign trust where the distribution is from an estate that arose as a consequence of death of an individual. Does CRA still maintain its position from the 2007 STEP Roundtable, Q.8 that reporting would be required if the estate has been administered and the assets are now held in a testamentary trust in light of the Hess, 2011 TCC 360, decision?
CRA confirmed that its position continues to be that, although Form T1142 does not have to be filed by a person who receives a distribution from a non-resident estate during the period of administration of the estate, once the estate has been administered, the Canadian beneficiary of any ongoing non-resident testamentary trust is required to file T1142 in any year where a distribution is received from a trust, or where a Canadian beneficiary becomes indebted to the trust. Generally, an estate is considered to be fully administered when the assets in the estate have been distributed and, if applicable, a clearance certificate is requested.
In Hess, the Tax Court concluded that no evidence had been provided to allow it to determine whether the estate had been administered, so that there was no reasonable basis for it to conclude that the testamentary trust was not an estate.