A bare trust (not described in (a) to (e.1) of s. 108(1) – trust) holds no property in the year other than a Cdn.$10,000 government bond and money, not exceeding Cdn.$50,000 in the year, so that it satisfies s. 150(1.2)(b). Any income and capital gains from the trust’s property is reported by its sole beneficiary (a natural person or corporation).
A. If the bond matures in the year, would s. 150(1.1)(b)(ii) require the bare trust to file a T3 return for the year in which the bond matured on the basis that the trust had thereby disposed of the bond?
CRA noted that under s. 104(1), the bare trust was not a trust for purposes of the definition in s. 248(1) of “disposition,” other than ss. (b)(v) and (k) of that definition, which were not relevant in this context, so that there would be no disposition by the bare trust of the bond.
B. If in the year of the maturity of the bond, the bare trust is wound up and the cash proceeds from the bond are transferred to the beneficiary, would this result in a disposition by the bare trust pursuant to s. (b)(v) of the definition of “disposition”?
CRA indicated that, notwithstanding the wording of s. (b)(v) of the definition of “disposition,” the exclusion in s. (e) of that definition would apply. In particular, the bare trust would not be considered to be a trust for the purposes of s. (e)(ii) of the definition of “disposition,” and the s. (e) exclusion would apply provided that the property is transferred directly to the beneficiary. Accordingly, the trust termination would not be considered to entail the disposition of the property held by the bare trust.