Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2014-11-11 and last amended on 2014-11-01. Previous Versions

PART XII.2TAX ON DESIGNATED INCOME OF CERTAIN TRUSTS

Marginal note:Definitions
  •  (1) The following definitions apply in this Part.

    “designated beneficiary”

    « bénéficiaire étranger ou assimilé »

    “designated beneficiary”, under a particular trust at any time, means a beneficiary, under the particular trust, who is at that time

    • (a) a non-resident person;

    • (b) a non-resident-owned investment corporation;

    • (c) a person who is, because of subsection 149(1), exempt from tax under Part I on all or part of their taxable income and who acquired an interest as a beneficiary under the particular trust after October 1, 1987 directly or indirectly from a beneficiary under the particular trust except if

      • (i) the interest was, at all times after the later of October 1, 1987 and the day on which the interest was created, held by persons who were exempt from tax under Part I on all of their taxable income because of subsection 149(1), or

      • (ii) the person is a trust, governed by a registered retirement savings plan or a registered retirement income fund, who acquired the interest, directly or indirectly, from an individual or the spouse or common-law partner, or former spouse or common-law partner, of the individual who was, immediately after the interest was acquired, a beneficiary under the trust governed by the fund or plan;

    • (d) another trust (referred to in this paragraph as the “other trust”) that is not a testamentary trust, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time

      • (i) a non-resident person,

      • (ii) a non-resident-owned investment corporation,

      • (iii) a trust that is not

        • (A) a testamentary trust,

        • (B) a mutual fund trust,

        • (C) a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, or

        • (D) a trust

          • (I) whose interest, at that time, in the other trust was held, at all times after the day on which the interest was created, either by it or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and

          • (II) none of the beneficiaries under which is, at that time, a designated beneficiary under it, or

      • (iv) a person or partnership that

        • (A) is a designated beneficiary under the other trust because of paragraph (c) or (e), or

        • (B) would be a designated beneficiary under the particular trust because of paragraph (c) or (e) if, instead of being a beneficiary under the other trust, the person or partnership were at that time a beneficiary, under the particular trust, whose interest as a beneficiary under the particular trust were

          • (I) identical to its interest (referred to in this clause as the “particular interest”) as a beneficiary under the other trust,

          • (II) acquired from each person or partnership from whom it acquired the particular interest, and

          • (III) held, at all times after the later of October 1, 1987 and the day on which the particular interest was created, by the same persons or partnerships that held the particular interest at those times; or

    • (e) a particular partnership any of the members of which is at that time

      • (i) another partnership, except if

        • (A) each such other partnership is a Canadian partnership,

        • (B) the interest of each such other partnership in the particular partnership is held, at all times after the day on which the interest was created, by the other partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,

        • (C) the interest of each member, of each such other partnership, that is a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income was held, at all times after the day on which the interest was created, by that member or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and

        • (D) the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,

      • (ii) a non-resident person,

      • (iii) a non-resident-owned investment corporation,

      • (iv) another trust that is, under paragraph (d), a designated beneficiary of the particular trust or that would, under paragraph (d), be a designated beneficiary of the particular trust if the other trust were at that time a beneficiary under the particular trust whose interest as a beneficiary under the particular trust were

        • (A) acquired from each person or partnership from whom the particular partnership acquired its interest as a beneficiary under the particular trust, and

        • (B) held, at all times after the later of October 1, 1987 and the day on which the particular partnership’s interest as a beneficiary under the particular trust was created, by the same persons or partnerships that held that interest of the particular partnership at those times, or

      • (v) a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income except if the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income.

    “designated income”

    « revenu de distribution »

    “designated income”, of a trust for a taxation year, means the amount that would be the income of the trust for the year determined under section 3 if

    • (a) this Act were read without reference to subsections 104(6), (12) and (30);

    • (b) the trust had no income other than taxable capital gains from dispositions described in paragraph (c) and incomes from

      • (i) real or immovable properties in Canada (other than Canadian resource properties),

      • (ii) timber resource properties,

      • (iii) Canadian resource properties (other than properties acquired by the trust before 1972), and

      • (iv) businesses carried on in Canada;

    • (c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from

      • (i) dispositions of taxable Canadian property, and

      • (ii) dispositions of particular property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)), or property for which the particular property is substituted, that was transferred at any particular time to a particular trust in circumstances in which subsection 73(1) or 107.4(3) applied, if

        • (A) it is reasonable to conclude that the property was so transferred in anticipation that a person beneficially interested at the particular time in the particular trust would subsequently cease to reside in Canada, and a person beneficially interested at the particular time in the particular trust did subsequently cease to reside in Canada, or

        • (B) when the property was so transferred, the terms of the particular trust satisfied the conditions in subparagraph 73(1.01)(c)(i) or (iii), and it is reasonable to conclude that the transfer was made in connection with the cessation of residence, on or before the transfer, of a person who was, at the time of the transfer, beneficially interested in the particular trust and a spouse or common-law partner, as the case may be, of the transferor of the property to the particular trust; and

    • (d) the only losses referred to in paragraph 3(d) were losses from sources described in any of subparagraphs (b)(i) to (iv).

  • Marginal note:Tax not payable

    (2) No tax is payable under this Part for a taxation year by a trust that was throughout the year

    • (a) a testamentary trust;

    • (b) a mutual fund trust;

    • (c) exempt from tax under Part I because of subsection 149(1);

    • (d) a trust to which paragraph (a), (a.1) or (c) of the definition “trust” in subsection 108(1) applies; or

    • (e) non-resident.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 210;
  • 1994, c. 21, s. 96;
  • 2000, c. 12, s. 142;
  • 2013, c. 34, s. 341.