Election to Be an Electing Contributor

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The resident contributor of a deemed resident trust may make an election, under federal legislation, to be an electing contributor. Where a deemed resident trust has an electing contributor at the end of its taxation year (or at the time immediately before the trust ceases to exist), the portion of its income (calculated after any losses from other years are carried over) that is proportional to the total value of the electing contributor's contribution to the trust up to that time must be included as Canadian property income in calculating the contributor's income for the taxation year in which the trust's taxation year ends.

You must enter this property income on an RL-16 slip (see courtesy translation RL-16-T) completed in the name of the contributor. You can deduct an amount equal to the property income amount on line 81 of the Trust Income Tax Return (TP-646-V).

If the trust paid foreign income tax on the income, it may make a designation in favour of the contributor to have the income deemed to be either foreign business income or foreign non-business income, as the case may be. The maximum income that may be designated must correspond to the trust's income from that source. The trust can therefore make another designation to have the foreign income tax paid on the income deemed to have been paid by the contributor.

The election to be an electing contributor is effective with respect to the trust and the contributor as of the contributor's taxation year that includes the time of the election, or as of the taxation year that ends before this time, and for all subsequent years.

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