A trust is considered to be a specified trust for a particular taxation year if it is an inter vivos trust that was not resident in Canada at any time in the year and that is not tax-exempt.
If, during the taxation year, such a trust is the owner of a specified immovable or is a member of a partnership that owns such an immovable, it must pay income tax on the property income (or its share of the property income, where it is a member of a partnership) derived from the rental of the specified immovable.
A specified trust must meet the following tax obligations:
- A specified trust that did not earn income from other sources in Québec must complete lines 1 through 11 (making sure to check box 8b) and Part 5 of the Trust Income Tax Return (TP-646-V) before reporting any property income derived from the rental of a specified immovable and calculating the income tax payable on such income on Schedule F of the return.
- A specified trust that earned taxable income in Québec from other sources (such as business income) must calculate the income tax payable on that income on the return in the usual way. The trust must also report any property income derived from the rental of a specified immovable and calculate the income tax payable on that income on Schedule F of the Trust Income Tax Return (TP-646-V).
The trust has to file an income tax return and Schedule F every year, regardless of whether it is required to pay income tax.
Where the rental of a specified immovable results in a net loss with respect to one immovable and net income with respect to another, the loss can be deducted only from the net income of that other immovable.
If, in a future taxation year, the trust becomes resident in Canada while it is the owner of a specified immovable, it will be deemed to have disposed of the immovable immediately before becoming resident in Canada, for proceeds equal to the fair market value (FMV) of the immovable at that time, and to have reacquired it, immediately afterwards, at a price equal to the proceeds of the deemed disposition.
For more information, see section 126.96.36.199 of the Guide to Filing the Trust Income Tax Return (TP-646.G-V).