Amateur Athlete Trust
An amateur athlete trust is a trust created under an arrangement whereby funds are received for the benefit of an amateur athlete. However, to preserve the athlete's eligibility to compete in a sporting event sanctioned by an international sport federation, the funds must be held, controlled and administered by a registered Canadian amateur athletic association, in accordance with the rules of the federation.
If an athlete is a member of a registered Canadian amateur athletic association and he or she is eligible to compete in sporting events as a member of the Canadian national team, an amateur athlete trust can be created provided:
- an arrangement such as the one described above has been made; or
- an arrangement has been made between the athlete and an issuer (as described in the definition of “qualifying arrangement” in subsection 146.2(1) of the federal Income Tax Act) establishing the trust as the receiver and manager of the athlete's qualifying performance income (income from endorsements, cash prizes and public appearances and speeches).
An amateur athlete trust is considered to have been created on the day on which the association or the issuer, as applicable, receives the first payment and the athlete becomes the beneficiary.
Under the Taxation Act, an amateur athlete trust is not required to pay income tax on its income. However, it must file the Trust Income Tax Return (TP-646-V) and an RL-16 slip (see courtesy translation RL-16-T) to report the amounts paid to the athlete, or for the benefit of the athlete, during the year (see point 7 in the instructions for line 61 in the Guide to Filing the Trust Income Tax Return (TP-646.G-V)).
If, over a period of eight years, the beneficiary did not compete in an international sporting event as a member of a Canadian national team, we consider that the trust ceased to exist at the end of the taxation year in which the above-mentioned condition is met and that the trust allocated to the beneficiary an amount equal to the fair market value (FMV) of the property it held at that time. The eight-year period begins the year in which the athlete last competed in such an event or the year in which the trust was created, whichever is later.
If the eight-year period ended in 2019, it is extended for another year so that it will end in 2020, and the deemed distribution of amounts held by the trust will occur at the end of the 2020 taxation year.