Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))
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Act current to 2024-11-26 and last amended on 2024-07-01. Previous Versions
Marginal note:Reference to trust or estate
104 (1) In this Act, a reference to a trust or estate (in this Subdivision referred to as a “trust”) shall, unless the context otherwise requires, be read to include a reference to the trustee, executor, administrator, liquidator of a succession, heir or other legal representative having ownership or control of the trust property, but, except for the purposes of this subsection, subsection (1.1), section 150, subparagraph (b)(v) of the definition disposition in subsection 248(1) and paragraph (k) of that definition, a trust is deemed not to include an arrangement under which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property unless the trust is described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1).
Marginal note:Restricted meaning of beneficiary
(1.1) Notwithstanding subsection 248(25), for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time if the person or partnership is beneficially interested in the trust at the particular time solely because of
(a) a right that may arise as a consequence of the terms of the will or other testamentary instrument of an individual who, at the particular time, is a beneficiary under the trust;
(b) a right that may arise as a consequence of the law governing the intestacy of an individual who, at that time, is a beneficiary under the trust;
(c) a right as a shareholder under the terms of the shares of the capital stock of a corporation that, at the particular time, is a beneficiary under the trust;
(d) a right as a member of a partnership under the terms of the partnership agreement, where, at the particular time, the partnership is a beneficiary under the trust; or
(e) any combination of rights described in paragraphs (a) to (d).
Marginal note:Taxed as individual
(2) A trust shall, for the purposes of this Act, and without affecting the liability of the trustee or legal representative for that person’s own income tax, be deemed to be in respect of the trust property an individual, but where there is more than one trust and
(a) substantially all of the property of the various trusts has been received from one person, and
(b) the various trusts are conditioned so that the income thereof accrues or will ultimately accrue to the same beneficiary, or group or class of beneficiaries,
such of the trustees as the Minister may designate shall, for the purposes of this Act, be deemed to be in respect of all the trusts an individual whose property is the property of all the trusts and whose income is the income of all the trusts.
Marginal note:Deemed disposition by trust
(4) Every trust is, at the end of each of the following days, deemed to have disposed of each property of the trust (other than exempt property) that was capital property (other than depreciable property) or land included in the inventory of a business of the trust for proceeds equal to its fair market value (determined with reference to subsection 70(5.3)) at the end of that day and to have reacquired the property immediately after that day for an amount equal to that fair market value, and for the purposes of this Act those days are
(a) where the trust
(i) is a trust that was created by the will of a taxpayer who died after 1971 and that, at the time it was created, was a trust,
(i.1) is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(c) (or, in the case of a transfer that occurred in a taxation year before 2007, (b) or (d), as those paragraphs read in their application to that taxation year) or (6)(d) applied, and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust,
(ii) is a trust that was created after June 17, 1971 by a taxpayer during the taxpayer’s lifetime that, at any time after 1971, was a trust, or
(ii.1) is a trust (other than a trust the terms of which are described in clause (iv)(A) that elects in its return of income under this Part for its first taxation year that this subparagraph not apply) that was created after 1999 by a taxpayer during the taxpayer’s lifetime and that, at any time after 1999, was a trust
under which
(iii) the taxpayer’s spouse or common-law partner was entitled to receive all of the income of the trust that arose before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner could, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust, or
(iv) in the case of a trust described in subparagraph (ii.1) created by a taxpayer who had attained 65 years of age at the time the trust was created,
(A) the taxpayer was entitled to receive all of the income of the trust that arose before the taxpayer’s death and no person except the taxpayer could, before the taxpayer’s death, receive or otherwise obtain the use of any of the income or capital of the trust,
(B) the taxpayer or the taxpayer’s spouse was, in combination with the spouse or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the spouse and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, or
(C) the taxpayer or the taxpayer’s common-law partner was, in combination with the common-law partner or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the common-law partner and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust,
the day on which the death or the later death, as the case may be, occurs;
(a.1) where the trust is a pre-1972 spousal trust on January 1, 1993 and the spouse or common-law partner referred to in the definition pre-1972 spousal trust in subsection 108(1) in respect of the trust was
(i) in the case of a trust created by the will of a taxpayer, alive on January 1, 1976, and
(ii) in the case of a trust created by a taxpayer during the taxpayer’s lifetime, alive on May 26, 1976,
the day that is the later of
(iii) the day on which that spouse or common-law partner dies, and
(iv) January 1, 1993;
(a.2) where the trust makes a distribution to a beneficiary in respect of the beneficiary’s capital interest in the trust, it is reasonable to conclude that the distribution was financed by a liability of the trust and one of the purposes of incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of any individual, the day on which the distribution is made (determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust);
(a.3) where property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) has been transferred by a taxpayer after December 17, 1999 to the trust in circumstances to which subsection 73(1) applied, it is reasonable to conclude that the property was so transferred in anticipation that the taxpayer would subsequently cease to reside in Canada and the taxpayer subsequently ceases to reside in Canada, the first day after that transfer during which the taxpayer ceases to reside in Canada (determined as if a day ends for the trust immediately after each time at which the taxpayer ceases to be resident in Canada);
(a.4) where the trust is a trust to which property was transferred by a taxpayer who is an individual (other than a trust) in circumstances in which section 73 or subsection 107.4(3) applied, the transfer did not result in a change in beneficial ownership of that property and no person (other than the taxpayer) or partnership has any absolute or contingent right as a beneficiary under the trust (determined with reference to subsection (1.1)), the day on which the death of the taxpayer occurs;
(b) the day that is 21 years after the latest of
(i) January 1, 1972,
(ii) the day on which the trust was created, and
(iii) where applicable, the day determined under paragraph (a), (a.1) or (a.4) as those paragraphs applied from time to time after 1971; and
(c) the day that is 21 years after any day (other than a day determined under any of paragraphs (a) to (a.4)) that is, because of this subsection, a day on which the trust is deemed to have disposed of each such property.
Marginal note:Depreciable property
(5) Every trust is, at the end of each day determined under subsection (4) in respect of the trust, deemed to have disposed of each property of the trust (other than exempt property) that was a depreciable property of a prescribed class of the trust for proceeds equal to its fair market value at the end of that day and to have reacquired the property immediately after that day at a capital cost (in this subsection referred to as the “deemed capital cost”) equal to that fair market value, except that
(a) where the amount that was the capital cost to the trust of the property immediately before the end of the day (in this paragraph referred to as the “actual capital cost”) exceeds the deemed capital cost to the trust of the property, for the purpose of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) as they apply in respect of the property at any subsequent time,
(i) the capital cost to the trust of the property on its reacquisition shall be deemed to be the amount that was the actual capital cost to the trust of the property, and
(ii) the excess shall be deemed to have been allowed under paragraph 20(1)(a) to the trust in respect of the property in computing its income for taxation years that ended before the trust reacquired the property;
(b) for the purposes of this subsection, the reference to “at the end of a taxation year” in subsection 13(1) shall be read as a reference to “at the particular time a trust is deemed by subsection 104(5) to have disposed of depreciable property of a prescribed class”; and
(c) for the purpose of computing the excess, if any, referred to in subsection 13(1) at the end of the taxation year of a trust that included a day on which the trust is deemed by this subsection to have disposed of a depreciable property of a prescribed class, any amount that, on that day, was included in the trust’s income for the year under subsection 13(1) as it reads because of paragraph 104(5)(b), shall be deemed to be an amount included under section 13 in the trust’s income for a preceding taxation year.
Marginal note:NISA Fund No. 2
(5.1) Every trust that holds an interest in a NISA Fund No. 2 that was transferred to it in circumstances to which paragraph 70(6.1)(b) applied is deemed, at the end of the day on which the spouse or common-law partner referred to in that paragraph dies, to have been paid an amount out of the fund equal to the balance at the end of that day in the fund so transferred.
Marginal note:Resource property
(5.2) Where at the end of a day determined under subsection (4) in respect of a trust, the trust owns a Canadian resource property (other than an exempt property) or a foreign resource property (other than an exempt property),
(a) for the purposes of determining the amounts under subsection 59(1), paragraphs 59(3.2)(c) and (c.1), subsections 66(4) and 66.2(1), the definition cumulative Canadian development expense in subsection 66.2(5), the definition cumulative foreign resource expense in subsection 66.21(1), subsection 66.4(1) and the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), the trust is deemed
(i) to have a taxation year (in this subsection referred to as the “old taxation year”) that ended at the end of that day and a new taxation year that begins immediately after that day, and
(ii) to have disposed, immediately before the end of the old taxation year, of each of those properties for proceeds that became receivable at that time equal to its fair market value at that time and to have reacquired, at the beginning of the new taxation year, each such property for an amount equal to that fair market value; and
(b) for the particular taxation year of the trust that included that day, the trust shall
(i) include in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c) in respect of the old taxation year and the amount so included shall, for the purposes of the determination of B in the definition cumulative Canadian development expense in subsection 66.2(5), be deemed to have been included in computing its income for a preceding taxation year,
(i.1) include in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c.1) in respect of the old taxation year and the amount so included is, for the purpose of determining the value of B in the definition cumulative foreign resource expense in subsection 66.21(1), deemed to have been included in computing its income for a preceding taxation year, and
(ii) deduct in computing its income for the particular taxation year the amount, if any, determined under subsection 66(4) in respect of the old taxation year and the amount so deducted shall, for the purposes of paragraph 66(4)(a), be deemed to have been deducted for a preceding taxation year.
(5.3) to (5.7) [Repealed, 2013, c. 34, s. 231]
Marginal note:Trust transfers
(5.8) Where capital property, land included in inventory, Canadian resource property or foreign resource property is transferred at a particular time by a trust (in this subsection referred to as the “transferor trust”) to another trust (in this subsection referred to as the “transferee trust”) in circumstances in which subsection 107(2) or 107.4(3) or paragraph (f) of the definition disposition in subsection 248(1) applies,
(a) for the purposes of applying subsections 104(4) to 104(5.2) after the particular time,
(i) subject to paragraphs (b) to (b.3), the first day (in this subsection referred to as the “disposition day”) that ends at or after the particular time that would, if this section were read without reference to paragraphs (4)(a.2) and (a.3), be determined in respect of the transferee trust is deemed to be the earliest of
(A) the first day ending at or after the particular time that would be determined under subsection 104(4) in respect of the transferor trust without regard to the transfer and any transaction or event occurring after the particular time,
(B) the first day ending at or after the particular time that would otherwise be determined under subsection 104(4) in respect of the transferee trust without regard to any transaction or event occurring after the particular time,
(C) the first day that ends at or after the particular time, where
(I) the transferor trust is a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1), and
(II) the spouse or common-law partner referred to in paragraph (4)(a) or in the definition pre-1972 spousal trust in subsection 108(1) is alive at the particular time,
(C.1) the first day that ends at or after the particular time, where
(I) the transferor trust is an alter ego trust, a trust to which paragraph (4)(a.4) applies or a joint spousal or common-law partner trust, and
(II) the taxpayer referred to in paragraph (4)(a) or (a.4), as the case may be, is alive at the particular time, and
(D) where
(I) the disposition day would, but for the application of this subsection to the transfer, be determined under paragraph 104(5.3)(a) in respect of the transferee trust, and
(II) the particular time is after the day that would, but for subsection 104(5.3), be determined under paragraph 104(4)(b) in respect of the transferee trust,
the first day ending at or after the particular time, and
(ii) where the disposition day determined in respect of the transferee trust under subparagraph 104(5.8)(a)(i) is earlier than the day referred to in clause 104(5.8)(a)(i)(B) in respect of the transferee trust, subsections 104(4) to 104(5.2) do not apply to the transferee trust on the day referred to in clause 104(5.8)(a)(i)(B) in respect of the transferee trust;
(b) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1),
(ii) the spouse or common-law partner referred to in paragraph (4)(a) or in the definition pre-1972 spousal trust in subsection 108(1) is alive at the particular time, and
(iii) the transferee trust is a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1);
(b.1) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is an alter ego trust,
(ii) the taxpayer referred to in paragraph (4)(a) is alive at the particular time, and
(iii) the transferee trust is an alter ego trust;
(b.2) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a joint spousal or common-law partner trust,
(ii) either the taxpayer referred to in paragraph (4)(a), or the spouse or common-law partner referred to in that paragraph, is alive at the particular time, and
(iii) the transferee trust is a joint spousal or common-law partner trust;
(b.3) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a trust to which paragraph (4)(a.4) applies,
(ii) the taxpayer referred to in paragraph (4)(a.4) is alive at the particular time, and
(iii) the transferee trust is a trust to which paragraph (4)(a.4) applies; and
(c) for the purposes of subsection 104(5.3), unless a day ending before the particular time has been determined under paragraph 104(4)(a.1) or 104(4)(b) or would, but for subsection 104(5.3), have been so determined, a day determined under subparagraph 104(5.8)(a)(i) shall be deemed to be a day determined under paragraph 104(4)(a.1) or 104(4)(b), as the case may be, in respect of the transferee trust.
Marginal note:Deduction in computing income of trust
(6) Subject to subsections (7) to (7.1), for the purposes of this Part, there may be deducted in computing the income of a trust for a taxation year
(a) in the case of an employee trust, the amount by which the amount that would, but for this subsection, be its income for the year exceeds the amount, if any, by which
(i) the total of all amounts each of which is its income for the year from a business
exceeds
(ii) the total of all amounts each of which is its loss for the year from a business;
(a.1) in the case of a trust governed by an employee benefit plan, such part of the amount that would, but for this subsection, be its income for the year as was paid in the year to a beneficiary;
(a.2) where the taxable income of the trust for the year is subject to tax under this Part because of paragraph 146(4)(c) or subsection 146.3(3.1), the part of the amount that, but for this subsection, would be the income of the trust for the year that was paid in the year to a beneficiary;
(a.3) in the case of a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, such part of its income for the year as became payable in the year to a beneficiary;
(a.4) in the case of an employee life and health trust, an amount that became payable by the trust in the year as a designated employee benefit (as defined in subsection 144.1(1)); and
(b) in any other case, the amount that the trust claims not exceeding the amount, if any, determined by the formula
A – B
where
- A
- is the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary, and
- B
- is
(i) if the trust is a trust for which a day is to be determined under paragraph (4)(a) or (a.4) by reference to a death or later death, as the case may be, that has not occurred before the beginning of the year, the total of
(A) the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary (other than an individual whose death is that death or later death, as the case may be), and
(B) the total of all amounts each of which
(I) is included in its income (determined without reference to this subsection and subsection (12)) for the year — if the year is the year in which that death or later death, as the case may be, occurs and paragraph (13.4)(b) does not apply in respect of the trust for the year — because of the application of subsection (4), (5), (5.1) or (5.2) or 12(10.2), and
(II) is not included in the amount determined for clause (A) for the year, and
(ii) if the trust is a SIFT trust for the year, the amount, if any, by which
(A) the amount determined for A for the trust for the year
exceeds
(B) the amount, if any, by which the amount determined for A for the trust for the year exceeds its non-portfolio earnings for the year.
Marginal note:Non-resident beneficiary
(7) No deduction may be made under subsection 104(6) in computing the income for a taxation year of a trust in respect of such part of an amount that would otherwise be its income for the year as became payable in the year to a beneficiary who was, at any time in the year, a designated beneficiary of the trust (as that expression applies for the purposes of section 210.3) unless, throughout the year, the trust was resident in Canada.
Marginal note:Trusts deemed to be resident in Canada
(7.01) If a trust is deemed by subsection 94(3) to be resident in Canada for a taxation year for the purpose of computing the trust’s income for the year, the maximum amount deductible under subsection (6) in computing its income for the year is the amount, if any, by which
(a) the maximum amount that, if this Act were read without reference to this subsection, would be deductible under subsection (6) in computing its income for the year,
exceeds
(b) the total of
(i) the portion of the trust’s designated income for the year (within the meaning assigned by section 210) that became payable in the year to a non-resident beneficiary under the trust in respect of an interest of the non-resident as a beneficiary under the trust, and
(ii) all amounts each of which is determined by the formula
A × B
where
- A
- is an amount (other than an amount described in subparagraph (i)) that
(A) is paid or credited (having the meaning assigned by Part XIII) in the year to the trust,
(B) would, if this Act were read without reference to subparagraph 94(3)(a)(viii), paragraph 212(2)(b) and sections 216 and 217, be an amount as a consequence of the payment or crediting of which the trust would have been liable to tax under Part XIII, and
(C) becomes payable in the year by the trust to a non-resident beneficiary under the trust in respect of an interest of the non-resident as a beneficiary under the trust, and
- B
- is
(A) 0.35, if the trust can establish to the satisfaction of the Minister that the non-resident beneficiary to whom the amount described in the description of A is payable is resident in a country with which Canada has a tax treaty under which the income tax that Canada may impose on the beneficiary in respect of the amount is limited, and
(B) 0.6, in any other case.
Marginal note:Limitation — amount claimed as gift
(7.02) No deduction may be made under subsection (6) in computing the income for a taxation year of an estate that arose on and as a consequence of an individual’s death in respect of a payment to the extent that the payment is a gift in respect of which an amount is deducted under section 118.1 for any taxation year in computing the individual’s tax payable under this Part.
Marginal note:Capital interest greater than income interest
(7.1) Where it is reasonable to consider that one of the main purposes for the existence of any term, condition, right or other attribute of an interest in a trust (other than a personal trust) is to give a beneficiary a percentage interest in the property of the trust that is greater than the beneficiary’s percentage interest in the income of the trust, no amount may be deducted under paragraph 104(6)(b) in computing the income of the trust.
Marginal note:Avoidance of s. (7.1)
(7.2) Notwithstanding any other provision of this Act, where
(a) a taxpayer has acquired a right to or to acquire an interest in a trust, or a right to or to acquire a property of a trust, and
(b) it is reasonable to consider that one of the main purposes of the acquisition was to avoid the application of subsection 104(7.1) in respect of the trust,
on a disposition of the right (other than pursuant to the exercise thereof), the interest or the property, there shall be included in computing the income of the taxpayer for the taxation year in which the disposition occurs the amount, if any, by which
(c) the proceeds of disposition of the right, interest or property, as the case may be,
exceed
(d) the cost amount to the taxpayer of the right, interest or property, as the case may be.
(10) and (11) [Repealed, 2013, c. 34, s. 231]
Marginal note:Deduction of amounts included in preferred beneficiaries’ incomes
(12) There may be deducted in computing the income of a trust for a taxation year the lesser of
(a) the total of all amounts designated under subsection 104(14) by the trust in respect of the year, and
(b) the accumulating income of the trust for the year.
Marginal note:Income of beneficiary
(13) There shall be included in computing the income for a particular taxation year of a beneficiary under a trust such of the following amounts as are applicable:
(a) in the case of a trust (other than a trust referred to in paragraph (a) of the definition trust in subsection 108(1)), such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as became payable in the trust’s year to the beneficiary; and
(b) in the case of a trust governed by an employee benefit plan to which the beneficiary has contributed as an employer, such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as was paid in the trust’s year to the beneficiary.
Marginal note:Amounts deemed not paid
(13.1) Where a trust, in its return of income under this Part for a taxation year throughout which it was resident in Canada and not exempt from tax under Part I by reason of subsection 149(1), designates an amount in respect of a beneficiary under the trust, not exceeding the amount determined by the formula
A/B × (C - D - E)
where
- A
- is the beneficiary’s share of the income of the trust for the year computed without reference to this Act,
- B
- is the total of all amounts each of which is a beneficiary’s share of the income of the trust for the year computed without reference to this Act,
- C
- is the total of all amounts each of which is an amount that, but for this subsection or subsection 104(13.2), would be included in computing the income of a beneficiary under the trust by reason of subsection 104(13) or 105(2) for the year,
- D
- is the amount deducted under subsection 104(6) in computing the income of the trust for the year, and
- E
- is equal to the amount determined by the trust for the year and used as the value of C for the purposes of the formula in subsection 104(13.2) or, if no amount is so determined, nil,
the amount so designated shall be deemed, for the purposes of subsections 104(13) and 105(2), not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust.
Marginal note:Idem
(13.2) Where a trust, in its return of income under this Part for a taxation year throughout which it was resident in Canada and not exempt from tax under Part I by reason of subsection 149(1), designates an amount in respect of a beneficiary under the trust, not exceeding the amount determined by the formula
A/B × C
where
- A
- is the amount designated by the trust for the year in respect of the beneficiary under subsection 104(21),
- B
- is the total of all amounts each of which has been designated for the year in respect of a beneficiary of the trust under subsection 104(21), and
- C
- is the amount determined by the trust and used in computing all amounts each of which is designated by the trust for the year under this subsection, not exceeding the amount by which
(i) the total of all amounts each of which is an amount that, but for this subsection or subsection 104(13.1), would be included in computing the income of a beneficiary under the trust by reason of subsection 104(13) or 105(2) for the year
exceeds
(ii) the amount deducted under subsection 104(6) in computing the income of the trust for the year,
the amount so designated shall
(a) for the purposes of subsections (13) and 105(2) (except in the application of subsection (13) for the purposes of subsection (21)), be deemed not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust; and
(b) except for the purposes of subsection 104(21) as it applies for the purposes of subsections 104(21.1) and 104(21.2), reduce the amount of the taxable capital gains of the beneficiary otherwise included in computing the beneficiary’s income for the year by reason of subsection 104(21).
Marginal note:Invalid designation
(13.3) Any designation made under subsection (13.1) or (13.2) by a trust in its return of income under this Part for a taxation year is invalid if the trust’s taxable income for the year, determined without reference to this subsection, is greater than nil.
Marginal note:Death of beneficiary — spousal and similar trusts
(13.4) If an individual’s death occurs on a day in a particular taxation year of a trust and the death is the death or later death, as the case may be, referred to in paragraph (4)(a), (a.1) or (a.4) in respect of the trust,
(a) the particular year is deemed to end at the end of that day, a new taxation year of the trust is deemed to begin immediately after that day and, for the purpose of determining the trust’s fiscal period after the new taxation year began, the trust is deemed not to have established a fiscal period before the new taxation year began;
(b) subject to paragraph (b.1), the trust’s income (determined without reference to subsections (6) and (12)) for the particular year is, notwithstanding subsection (24), deemed
(i) to have become payable in the year to the individual, and
(ii) not
(A) to have become payable to another beneficiary, or
(B) to be included under subsection 105(2) in computing the individual’s income;
(b.1) paragraph (b) does not apply in respect of the trust for the particular year, unless
(i) the individual is resident in Canada immediately before the death,
(ii) the trust is, immediately before the death, a testamentary trust that
(A) is a post-1971 spousal or common-law partner trust, and
(B) was created by the will of a taxpayer who died before 2017, and
(iii) an election — made jointly between the trust and the legal representative administering the individual’s graduated rate estate in prescribed form — that paragraph (b) applies is filed with
(A) the individual’s return of income under this Part for the individual’s year, and
(B) the trust’s return of income under this Part for the particular year; and
(c) in respect of the particular year
(i) the references in paragraph 150(1)(c) to “year” and in subparagraph (a)(ii) of the definition balance-due day in subsection 248(1) to “taxation year” are to be read as “calendar year in which the taxation year ends”, and
(ii) the reference in subsection 204(2) of the Income Tax Regulations to “end of the taxation year” is to be read as “end of the calendar year in which the taxation year ends”.
Marginal note:Election by trust and preferred beneficiary
(14) Where a trust and a preferred beneficiary under the trust for a particular taxation year of the trust jointly so elect in respect of the particular year in prescribed manner, such part of the accumulating income of the trust for the particular year as is designated in the election, not exceeding the allocable amount for the preferred beneficiary in respect of the trust for the particular year, shall be included in computing the income of the preferred beneficiary for the beneficiary’s taxation year in which the particular year ended and shall not be included in computing the income of any beneficiary of the trust for a subsequent taxation year.
(14.01) to (14.1) [Repealed, 2014, c. 39, s. 26]
Marginal note:Allocable amount for preferred beneficiary
(15) For the purpose of subsection 104(14), the allocable amount for a preferred beneficiary under a trust in respect of the trust for a taxation year is
(a) where the trust is an alter ego trust, a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1) at the end of the year and a beneficiary, referred to in paragraph (4)(a) or in that definition, is alive at the end of the year, an amount equal to
(i) if the preferred beneficiary is a beneficiary so referred to, the trust’s accumulating income for the year, and
(ii) in any other case, nil;
(b) where paragraph (a) does not apply and the preferred beneficiary’s interest in the trust is not solely contingent on the death of another beneficiary who has a capital interest in the trust and who does not have an income interest in the trust, the trust’s accumulating income for the year; and
(c) in any other case, nil.
Marginal note:SIFT deemed dividend
(16) If an amount (in this subsection and section 122 referred to as the trust’s “non-deductible distributions amount” for the taxation year) is determined under subparagraph (ii) of the description of B in paragraph (6)(b) in respect of a SIFT trust for a taxation year
(a) each beneficiary under the SIFT trust to whom at any time in the taxation year an amount became payable by the trust is deemed to have received at that time a taxable dividend that was paid at that time by a taxable Canadian corporation;
(b) the amount of a dividend described in paragraph (a) as having been received by a beneficiary at any time in a taxation year is equal to the amount determined by the formula
A/B × C
where
- A
- is the amount that became payable at that time by the SIFT trust to the beneficiary,
- B
- is the total of all amounts, each of which became payable in the taxation year by the SIFT trust to a beneficiary under the SIFT trust, and
- C
- is the SIFT trust’s non-deductible distributions amount for the taxation year;
(c) the amount of a dividend described in paragraph (a) in respect of a beneficiary under the SIFT trust is deemed for the purpose of subsection (13) not to be an amount payable to the beneficiary; and
(d) for the purposes of applying Part XIII in respect of each dividend described in paragraph (a), the SIFT trust is deemed to be a corporation resident in Canada that paid the dividend.
Marginal note:Trust for minor
(18) Where any part of the amount that, but for subsections 104(6) and 104(12), would be the income of a trust for a taxation year throughout which it was resident in Canada
(a) has not become payable in the year,
(b) was held in trust for an individual who did not attain 21 years of age before the end of the year,
(c) the right to which vested at or before the end of the year otherwise than because of the exercise by any person of, or the failure of any person to exercise, any discretionary power, and
(d) the right to which is not subject to any future condition (other than a condition that the individual survive to an age not exceeding 40 years),
notwithstanding subsection 104(24), that part of the amount is, for the purposes of subsections 104(6) and 104(13), deemed to have become payable to the individual in the year.
Marginal note:Designation in respect of taxable dividends
(19) A portion of a taxable dividend received by a trust, in a particular taxation year of the trust, on a share of the capital stock of a taxable Canadian corporation is, for the purposes of this Act other than Part XIII, deemed to be a taxable dividend on the share received by a taxpayer, in the taxpayer’s taxation year in which the particular taxation year ends, and is, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, deemed not to have been received by the trust, if
(a) an amount equal to that portion
(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and
(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;
(b) the taxpayer is in the particular taxation year a beneficiary under the trust;
(c) the trust is, throughout the particular taxation year, resident in Canada; and
(d) the total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the total of all amounts each of which is the amount of a taxable dividend, received by the trust in the particular taxation year, on a share of the capital stock of a taxable Canadian corporation.
Marginal note:Designation in respect of non-taxable dividends
(20) The portion of the total of all amounts, each of which is the amount of a dividend (other than a taxable dividend) paid on a share of the capital stock of a corporation resident in Canada to a trust during a taxation year of the trust throughout which the trust was resident in Canada, that can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of an amount that became payable in the year to a particular beneficiary under the trust shall be designated by the trust in respect of the particular beneficiary in the return of the trust’s income for the year for the purposes of subclause 53(2)(h)(i.1)(B)(II), paragraphs 107(1)(c) and 107(1)(d) and subsections 112(3.1), 112(3.2), 112(3.31) and 112(4.2).
Marginal note:Designation in respect of taxable capital gains
(21) For the purposes of sections 3 and 111, except as they apply for the purposes of section 110.6, and subject to paragraph 132(5.1)(b), an amount in respect of a trust’s net taxable capital gains for a particular taxation year of the trust is deemed to be a taxable capital gain, for the taxation year of a taxpayer in which the particular taxation year ends, from the disposition by the taxpayer of capital property if
(a) the amount
(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and
(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;
(b) the taxpayer is
(i) in the particular taxation year, a beneficiary under the trust, and
(ii) resident in Canada, unless the trust is, throughout the particular taxation year, a mutual fund trust;
(c) the trust is, throughout the particular taxation year, resident in Canada; and
(d) the total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s net taxable capital gains for the particular taxation year.
Marginal note:Late, amended or revoked designation
(21.01) A trust that has filed its return of income for its taxation year that includes February 22, 1994 may subsequently designate an amount under subsection 104(21), or amend or revoke a designation made under that subsection where the designation, amendment or revocation
(a) is made solely because of an increase or decrease in the net taxable capital gains of the trust for the year that results from an election or revocation to which subsection 110.6(25), 110.6(26) or 110.6(27) applies; and
(b) is filed with the Minister, with an amended return of income for the year, when the election or revocation referred to in paragraph 104(21.01)(a) is filed with the Minister.
Marginal note:Late, amended or revoked designation
(21.02) A designation, amendment or revocation under subsection 104(21.01) that affects an amount determined in respect of a beneficiary under subsection 104(21.2) may be made only where the trust
(a) designates an amount, or amends or revokes a designation made, under subsection 104(21.2) in respect of the beneficiary; and
(b) files the designation, amendment or revocation referred to in paragraph 104(21.02)(a) with the Minister when required by paragraph 104(21.01)(b).
Marginal note:Late, amended or revoked designation
(21.03) Where a trust designates an amount, or amends or revokes a designation, under subsection 104(21) or 104(21.2) in accordance with subsection 104(21.01),
(a) the designation or amended designation, as the case may be, is deemed to have been made in the trust’s return of income for the trust’s taxation year that includes February 22, 1994; and
(b) the designation that was revoked is deemed, other than for the purposes of this subsection and subsections 104(21.01) and 104(21.02), never to have been made.
(21.1) [Repealed, 2013, c. 34, s. 231]
Marginal note:Beneficiaries’ taxable capital gain
(21.2) Where, for the purposes of subsection (21), a personal trust or a trust referred to in subsection 7(2) designates an amount in respect of a beneficiary in respect of its net taxable capital gains for a taxation year (in this subsection referred to as the “designation year”),
(a) the trust shall in its return of income under this Part for the designation year designate an amount in respect of its eligible taxable capital gains, if any, for the designation year in respect of the beneficiary equal to the amount determined in respect of the beneficiary under each of subparagraphs 104(21.2)(b)(i) and 104(21.2)(b)(ii); and
(b) the beneficiary is, for the purposes of section 120.4 and for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of section 110.6,
(i) deemed to have disposed of the capital property referred to in clause (ii)(A), (B) or (C) if a taxable capital gain is determined in respect of the beneficiary for the beneficiary’s taxation year in which the designation year ends under those clauses, and
(ii) deemed to have a taxable capital gain for the beneficiary’s taxation year in which the designation year ends
(A) from a disposition of a capital property that is qualified farm or fishing property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × C)/(D × E)
and
(B) from a disposition of a capital property that is a qualified small business corporation share (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × F)/(D × E)
where
- A
- is the lesser of
(I) the amount determined by the formula
G - H
where
- G
- is the total of amounts designated under subsection (21) for the designation year by the trust, and
- H
- is the total of amounts designated under subsection (13.2) for the designation year by the trust, and
(II) the trust’s eligible taxable capital gains for the designation year,
- B
- is the amount, if any, by which the amount designated under subsection (21) for the designation year by the trust in respect of the beneficiary exceeds the amount designated under subsection (13.2) for the year by the trust in respect of the beneficiary for the taxation year,
- C
- is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties or qualified farm or fishing properties of the trust,
- D
- is the total of all amounts each of which is the amount determined for B for the designation year in respect of a beneficiary under the trust,
- E
- is the total of the amounts determined for C and F for the designation year in respect of the beneficiary, and
- F
- is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified small business corporation shares of the trust, other than qualified farm property, qualified fishing property or qualified farm or fishing property,
- I
- [Repealed, 2014, c. 39, s. 26]
(C) [Repealed, 2014, c. 39, s. 26]
and for the purposes of section 110.6, those capital properties shall be deemed to have been disposed of by the beneficiary in that taxation year of the beneficiary.
Marginal note:Beneficiaries QFFP taxable capital gain
(21.21) If clause (21.2)(b)(ii)(A) applies to deem, for the purposes of section 110.6, the beneficiary under a trust to have a taxable capital gain (referred to in this subsection as the “QFFP taxable capital gain”) from a disposition of capital property that is qualified farm or fishing property of the beneficiary, for the beneficiary’s taxation year that ends on or after April 21, 2015, and in which the designation year of the trust ends, for the purposes of subsection 110.6(2.2), the beneficiary is, if the trust complies with the requirements of subsection (21.22), deemed to have a taxable capital gain from the disposition of qualified farm or fishing property of the beneficiary on or after April 21, 2015 equal to the amount determined by the formula
A × B/C
where
- A
- is the amount of the QFFP taxable capital gain;
- B
- is, if the designation year of the trust ends on or after April 21, 2015, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm or fishing properties of the trust that were disposed of by the trust on or after April 21, 2015; and
- C
- is, if the designation year of the trust ends on or after April 21, 2015, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm or fishing properties.
Marginal note:Trusts to designate amounts
(21.22) A trust shall determine and designate, in its return of income under this Part for a designation year of the trust, the amount that is determined under subsection (21.21) to be the beneficiary’s taxable capital gain from the disposition on or after April 21, 2015 of qualified farm or fishing property of the beneficiary.
(21.23) and (21.24) [Repealed, 2014, c. 39, s. 26]
Marginal note:Net taxable capital gains of trust determined
(21.3) For the purposes of this section, the net taxable capital gains of a trust for a taxation year is the amount, if any, determined by the formula
A + B – C – D
where
- A
- is the total of all amounts each of which is a taxable capital gain of the trust for the year from the disposition of a capital property that was held by the trust immediately before the disposition,
- B
- is the total of all amounts each of which is deemed by subsection (21) to be a taxable capital gain of the trust for the year,
- C
- is the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, and
- D
- is the amount, if any, deducted under paragraph 111(1)(b) in computing the trust’s taxable income for the year.
(21.4) to (21.7) [Repealed, 2013, c. 34, s. 231]
Marginal note:Designation in respect of foreign source income
(22) For the purposes of this subsection, subsection (22.1) and section 126, an amount in respect of a trust’s income for a particular taxation year of the trust from a source in a country other than Canada is deemed to be income of a taxpayer, for the taxation year of the taxpayer in which the particular taxation year ends, from that source if
(a) the amount
(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and
(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14), was included in computing the income for that taxation year of the taxpayer;
(b) the taxpayer is in the particular taxation year a beneficiary under the trust;
(c) the trust is, throughout the particular taxation year, resident in Canada; and
(d) the total of all amounts each of which is an amount designated, under this subsection in respect of that source, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s income for the particular taxation year from that source.
Marginal note:Foreign tax deemed paid by beneficiary
(22.1) Where a taxpayer is a beneficiary under a trust, for the purposes of this subsection and section 126, the taxpayer shall be deemed to have paid as business-income tax or non-business-income tax, as the case may be, for a particular taxation year in respect of a source the amount determined by the formula
A × B/C
where
- A
- is the amount that, but for subsection 104(22.3), would be the business-income tax or non-business-income tax, as the case may be, paid by the trust in respect of the source for a taxation year (in this subsection referred to as “that year”) of the trust that ends in the particular year;
- B
- is the amount deemed, because of a designation under subsection 104(22) for that year by the trust, to be the taxpayer’s income from the source; and
- C
- is the trust’s income for that year from the source.
Marginal note:Recalculation of trust’s foreign source income
(22.2) For the purpose of section 126, there shall be deducted in computing a trust’s income from a source for a taxation year the total of all amounts deemed, because of designations under subsection 104(22) by the trust for the year, to be income of beneficiaries under the trust from that source.
Marginal note:Recalculation of trust’s foreign tax
(22.3) For the purpose of section 126, there shall be deducted in computing the business-income tax or non-business-income tax paid by a trust for a taxation year in respect of a source the total of all amounts deemed, because of designations under subsection 104(22) by the trust for the year, to be paid by beneficiaries under the trust as business-income tax or non-business-income tax, as the case may be, in respect of the source.
Marginal note:Definitions
(22.4) For the purposes of subsections 104(22) to 104(22.3), the expressions business-income tax and non-business-income tax have the meanings assigned by subsection 126(7).
Marginal note:Deceased beneficiary of graduated rate estate
(23) In the case of a trust that is a graduated rate estate,
(a) and (b) [Repealed, 2013, c. 34, s. 231]
(c) the income of a person for a taxation year from the trust shall be deemed to be the person’s benefits from or under the trust for the taxation year or years of the trust that ended in the year determined as provided by this section and section 105; and
(d) where an individual having income from the trust died after the end of a taxation year of the trust but before the end of the calendar year in which the taxation year ended, the individual’s income from the trust for the period commencing immediately after the end of the taxation year and ending at the time of death shall be included in computing the individual’s income for the individual’s taxation year in which the individual died unless the individual’s legal representative has elected otherwise, in which case the legal representative shall file a separate return of income for the period under this Part and pay the tax for the period under this Part as if
(i) the individual were another person,
(ii) the period were a taxation year,
(iii) that other person’s only income for the period were the individual’s income from the trust for that period, and
(iv) subject to sections 114.2 and 118.93, that other person were entitled to the deductions to which the individual was entitled under sections 110, 118 to 118.7 and 118.9 for the period in computing the individual’s taxable income or tax payable under this Part, as the case may be, for the period.
(e) [Repealed, 2014, c. 39, s. 26]
Marginal note:Amount payable
(24) For the purposes of subsections (6), (7), (7.01), (13), (16) and (20), subparagraph 53(2)(h)(i.1) and subsections 94(5.2) and (8), an amount is deemed not to have become payable to a beneficiary in a taxation year unless it was paid in the year to the beneficiary or the beneficiary was entitled in the year to enforce payment of it.
Marginal note:Pension benefits
(27) If a trust, in a taxation year in which it is resident in Canada and is the graduated rate estate of an individual, receives a superannuation or pension benefit or a benefit out of or under a foreign retirement arrangement and designates, in its return of income for the year under this Part, an amount in respect of a beneficiary under the trust equal to the portion (in this subsection referred to as the “beneficiary’s share”) of the benefit that
(a) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that, by reason of subsection 104(13), was included in computing the income for a particular taxation year of the beneficiary, and
(b) was not designated by the trust in respect of any other beneficiary under the trust,
the following rules apply:
(c) where
(i) the benefit is an amount described in subparagraph (a)(i) of the definition pension income in subsection 118(7), and
(ii) the beneficiary was a spouse or common-law partner of the individual,
the beneficiary’s share of the benefit shall be deemed, for the purposes of subsections 118(3) and 118(7), to be a payment described in subparagraph (a)(i) of the definition pension income in subsection 118(7) that is included in computing the beneficiary’s income for the particular year,
(d) where the benefit
(i) is a single amount (as defined in subsection 147.1(1)), other than an amount that relates to an actuarial surplus, paid by a registered pension plan to the trust as a consequence of the individual’s death and the individual was, at the time of death, a spouse or common-law partner of the beneficiary, or
(ii) would be an amount included in the total determined under paragraph 60(j) in respect of the beneficiary for the taxation year of the beneficiary in which the benefit was received by the trust if the benefit had been received by the beneficiary at the time it was received by the trust,
the beneficiary’s share of the benefit is, for the purposes of paragraph 60(j), an eligible amount in respect of the beneficiary for the particular year, and
(e) where the benefit is a single amount (as defined in subsection 147.1(1)) paid by a registered pension plan to the trust as a consequence of the individual’s death,
(i) if the beneficiary was, immediately before the death, a child or grandchild of the individual who, because of mental or physical infirmity, was financially dependent on the individual for support, the beneficiary’s share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary’s income for the particular year as a payment described in clause 60(l)(v)(B.01), and
(ii) if the beneficiary was, at the time of the death, under 18 years of age and a child or grandchild of the individual, the beneficiary’s share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary’s income for the particular year as a payment described in subclause 60(l)(v)(B.1)(II).
Marginal note:DPSP benefits
(27.1) Where
(a) a trust, in a taxation year (in this subsection referred to as the “trust year”) in which it is resident in Canada and is the graduated rate estate of an individual, receives an amount from a deferred profit sharing plan as a consequence of the individual’s death,
(b) the individual was an employee of an employer who participated in the plan on behalf of the individual, and
(c) the amount is not part of a series of periodic payments,
such portion of the amount as
(d) is included under subsection 147(10) in computing the income of the trust for the trust year,
(e) can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that was included under subsection (13) in computing the income for a particular taxation year of a beneficiary under the trust who was, at the time of the death, the individual’s spouse or common-law partner, and
(f) is designated by the trust in respect of the beneficiary in the trust’s return of income under this Part for the trust year
is, for the purposes of paragraph 60(j), an eligible amount inrespect of the beneficiary for the particular year.
Marginal note:Death benefit
(28) If the graduated rate estate of an individual receives an amount on or after the individual’s death in recognition of the individual’s service in an office or employment, the portion of the amount that can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be paid or payable at any time to a beneficiary under the estate is deemed
(a) to be an amount received by the beneficiary at that time on or after the death in recognition of the individual’s service in an office or employment; and
(b) except for purposes of this subsection, not to have been received by the estate.
(29) [Repealed, 2003, c. 28, s. 11(2)]
Marginal note:Tax under Part XII.2
(30) For the purposes of this Part, there shall be deducted in computing the income of a trust for a taxation year the tax paid by the trust for the year under Part XII.2.
Marginal note:Idem
(31) The amount in respect of a taxation year of a trust that is deemed under subsection 210.2(3) to have been paid by a beneficiary under the trust on account of the beneficiary’s tax under this Part shall, for the purposes of subsection 104(13), be deemed to be an amount in respect of the income of the trust for the year that has become payable by the trust to the beneficiary at the end of the year.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 104
- 1994, c. 7, Sch. II, s. 75, Sch. VIII, s. 42, c. 8, s. 12, c. 21, s. 46
- 1995, c. 3, s. 28
- 1996, c. 21, s. 18
- 1998, c. 19, s. 127
- 2000, c. 12, s. 142
- 2001, c. 17, s. 78
- 2003, c. 15, s. 72, c. 28, s. 11
- 2005, c. 19, s. 17
- 2007, c. 2, s. 15, c. 29, s. 8, c. 35, s. 27
- 2010, c. 25, s. 16
- 2013, c. 34, ss. 10, 231
- 2014, c. 39, s. 26
- 2015, c. 36, s. 5
- 2016, c. 12, s. 35
- 2017, c. 33, s. 35
- 2018, c. 12, s. 8
- 2022, c. 19, s. 13
- Date modified: