The executors adopt a first year-end for the estate of an individual who died on March 31, 2016, of September 30, 2016. The second and third year-ends are September 30, 2017 and 2018. Lastly, a year-end is deemed to arise on March 31, 2019 (36 months after death), which is the last taxation year during which the testamentary trust is a graduated rate estate. Thereafter, it is required to adopt a December 31 year-end. Does CRA agree?
CRA responded:
Assuming the estate otherwise meets all the conditions to be the deceased individual's GRE throughout the first 36 month period, where the executor chooses to have a short first taxation year end for the estate the 36 month period would span four taxation years.
In the scenario provided, the first and fourth taxation years are less than 12 months long, and the estate would be subject to tax based on the graduated tax rates for individuals for the first four taxation years as indicated.