1.1. Important information

The following terms have specific meanings for the purposes of this guide, the income tax return and the forms to be filed with the return:

• “Trust” means any type of trust or any succession.
• “Trustee” means a person acting as such, including a liquidator of a succession.
• “Testamentary trust” means both a succession and a trust created by will (unless it is necessary to be more specific, in which case the precise term is used).

1.1.1. Legal references

The information in this guide does not constitute a legal interpretation of the Taxation Act or any other legislation.

The numbers and abbreviations in italics at the end of certain paragraphs refer to sections of the Taxation Act (section numbers alone), the Regulation respecting the Taxation Act (section numbers containing an “R”) and the Tax Administration Act (section numbers preceded by “TAA”).

1.1.2. Succession that earned only retirement income, investment income or death benefits

If you are completing an income tax return for a succession that earned only retirement income, investment income or death benefits, the following will be of particular interest to you:

• the lines in the return that are preceded by the symbol  ;
• the sections of this guide that are preceded by the symbol  ;
• the sections of the Guide to Filing the RL-16 Slip: Trust Income (RL-16.G-V) that are printed on a coloured background.

1.1.3. Liquidator of a succession

If you are a liquidator of a succession, you do not have to file the Trust Income Tax Return (form TP-646-V) for in the following situations:

• The deceased person's property is distributed immediately after the person's death or the succession did not earn any income before the distribution of the property. However, you must give each beneficiary a statement showing their share of the property of the succession.
• The succession's only income is a death benefit from the Québec Pension Plan or the Canada Pension Plan that is included in the income of one or more beneficiaries of the succession.

Note that if a succession is wound up in its first taxation year, the beneficiaries can include in their income tax returns the income earned before the winding-up, based on their share of the succession's income.

1.2. Definitions

2.1. New obligation for payments over $10,000

As of January 1, 2024, trusts must make all payments and remittances over $10,000 electronically (for example, online or through a financial institution), unless special circumstances make it impossible to do so. Failure to do so may result in a penalty.

2.2. New form to pay an income tax balance online

Form TPF-1026.0.1.E-V, Online Payments – Trusts, can now be used to pay a trust's income tax balance online with a payment code. You can order the form online or by phone.

Note that you must order form TPZ-1026.0.1.F-V, Payment of Balance – Trusts, to pay the balance due by mail (cheque or money order) or at the counter of the trust's financial institution.

2.3. Additional information about the trust

For taxation years ending after December 30, 2023, a trust that is resident in Canada (other than a trust created by law or by a judgment) must provide additional information about each person who, over the course of the year, is:

• a trustee;
• a beneficiary;
• a settlor of the trust;
• a person who can exert control over the trustee's decisions with respect to the allocation of income or capital from the trust under the terms of the trust deed or a related agreement.

Note that excluded trusts are exempt from providing this additional information.

If a trust fails to file the income tax return with the required additional information by the deadline, it is liable to a penalty of $1,000 and, starting on the second day, an additional penalty of $100 per day until the return with the additional information is filed, up to a maximum of $5,000.

In addition to this new requirement, certain trusts that were previously not required to file a tax return will now be required to file one.

2.4. New type of trust: employee ownership trust

As of 2024, there is a new type of trust called an employee ownership trust (EOT). An EOT is a form of employee ownership where an irrevocable trust holds shares of a corporation for the benefit of the corporation's employees.

A trust is considered an EOT if it meets all the requirements, including:

• It is resident in Canada (excluding deemed resident trusts).
• Its objectives are to:
  • hold shares of qualifying businesses for the benefit of the trust's employee beneficiaries;
  • make payments to these employees, the amount of which is determined solely on length of their service, their remuneration and the number of hours they worked.

An EOT must also hold a majority interest in one or more qualifying businesses, and all or substantially all of its assets must be shares in the qualifying businesses.

See Types of trusts for more information.

2.5. New: Schedule A.1 – Election for Certain Trusts Regarding Taxable Capital Gains

For 2024, trusts that are not personal trusts can file Schedule A.1 (instead of Schedule A) to report their capital gains (or losses).

For more information see Schedule A.1 – Election for Certain Trusts Regarding Taxable Capital Gains.

2.6. New form for reporting cryptoassets

As of 2024, trusts must complete the Cryptoasset Return (TP-21.4.39-V) and file it with their income tax return if they owned, acquired, disposed of or used one or more cryptoassets during the year.

For more information, see the instructions for lines 55a and 55, lines 58a and 58 and line 217 of Schedule A.

2.7. Changes to the calculation of alternative minimum tax

As of 2024, the tax rate for alternative minimum tax (AMT) is 19% (i.e. the rate that applies to the second taxable income bracket in the personal income tax table) and graduated rate estates (GREs) are no longer subject to AMT.

In addition, the basic exemption, which now only applies to qualified disability trusts (QDTs), has been increased from $40,000 to $175,000 (indexed as of 2025). Note that EOTs are not subject to AMT.

Changes have also been made to other rates and amounts used to calculate AMT, including the inclusion rate for capital gains, the deduction for carrying charges and interest expenses on a loan to earn property income and the tax credit for donations and gifts.

For more information, see the instructions for lines 130 and 132.

2.8. Abolition of the additional 30% capital cost allowance (CCA)

A trust that acquired the following property after December 3, 2018, can claim additional CCA in the calculation of its income from a business for a taxation year:

• machinery or equipment used in manufacturing or processing (property included in class 53 of Schedule B to the Regulation respecting the Taxation Act);
• clean energy generation equipment (property included in class 43.1 or 43.2 of the schedule);
• general-purpose electronic data processing equipment and systems software for that equipment (property included in class 50 of the schedule);
• qualified intellectual property.

The additional CCA corresponds to 30% of the CCA claimed for the property for the previous taxation year.

However, the additional 30% CCA was abolished in 2024. Therefore, as of 2024, only property that meets the requirements and was acquired by December 31, 2023, can give entitlement to the additional 30% CCA for the remainder of the period applicable to the property.

2.9. The indigenous child and family services settlement

As of 2024, income of trusts established under the First Nations Child and Family Services, Jordan's Principle, and Trout Class Settlement Agreement is exempt from income tax. Consequently, payments received by individuals who are beneficiaries of such trusts are not to be included when computing income for tax purposes.

3.1. Taxation year of a trust

3.1.1. Inter vivos trust

The taxation year of an inter vivos trust corresponds to the calendar year.

A mutual fund trust, however, can elect to have its taxation year end on December 15 instead of December 31 (for more information, see Types of trusts).

3.1.2. Testamentary trust

The taxation year of a testamentary trust that is a graduated rate estate (GRE) must correspond to the period for which the trust's books are closed for the purpose of making an assessment under federal legislation.

A GRE can have a taxation year that does not correspond to the calendar year. However, the taxation year is deemed to end on the day the succession ceases to be a GRE. The end of any subsequent taxation year will correspond to the end of the calendar year.

If a GRE is wound up, the last taxation year of the trust ends on the day all of the property of the trust is distributed (the date entered on line 5b of the return must therefore correspond to the wind-up date entered on line 11 of the return).

The taxation year of other types of testamentary trusts must correspond to the calendar year. If a testamentary trust that is not a GRE is wound up during the year, its taxation year ends on December 31. The trust must file the final income tax return within 90 days after the end of the taxation year.

Section 1

3.2. Obligation to file the Trust Income Tax Return (form TP-646-V)

As a rule, a trust subject to Québec income tax for a given taxation year must file form TP-646-V, Trust Income Tax Return.

A trust subject to Québec income tax is a trust that is resident in Québec or carries on economic activities in Québec (for example, operating a business in Québec or disposing of a taxable Québec property).

As a rule, we consider that a trust is resident in Québec or in Canada if the trustee is resident in Québec or in Canada. However, we may consider that a trust is resident in Québec even if the trustee is not resident in Québec, if it is shown that a large portion of the control and administration of the trust's property is entrusted to a person, other than the trustee, who is resident in Québec.

Where certain legislative provisions apply only if the trust was resident in Canada throughout the year, the trust is deemed to have met this condition provided it was resident in Canada immediately before it ceased to exist.

3.2.1. Resident trust or deemed resident trust

All resident trusts and deemed resident trusts are subject to Québec income tax and, as a rule, must file an income tax return for every taxation year.

The term “resident trust” means any trust described under “Types of trusts ” that is subject to Québec income tax for a given taxation year because it is in one of the following situations:

• It is resident in Québec at the end of the year.
• It is resident in Canada, outside Québec, at the end of the year and it operates a business in Québec during the year.

For information on deemed resident trusts, see Deemed resident trust.

Sections 22 and 25

A resident or deemed resident trust has to file an income tax return even if it has no income tax payable in the following situations:

• The trust has no income tax payable for the year solely because it carried forward a loss from a previous year.
• The trust has to report a capital gain on property it sold in the year.
• The trust granted a beneficiary a benefit valued at more than $100 for upkeep and maintenance expenses and taxes on property the beneficiary used (for more information, see the instructions for line 74).
• The trust received income, gains or benefits intended for a beneficiary who is an individual resident in Québec or a corporation that has an establishment in Québec, and the total income shown on line 63 of its return is more than $500 or the income attributable to the beneficiary is more than $100.
• The trust is a trust other than an excluded trust and:
  • it is resident in Québec on the last day of the taxation year and is either a trust established otherwise than by law or judgment, or an express trust for common law purposes; or
  • it is resident outside Québec on the last day of the taxation year and is either a trust established otherwise than by law or judgment, or an express trust (for common law purposes) that carries on a business in Québec at any time during the year.

Sections 851.25, 905.1, 921.1, 997, 1000, 1086R57, 1086R69, 1087 and 1089

3.2.2. Deemed resident trust

A non-resident trust (other than an exempt foreign trust, is deemed to be a resident trust for a particular taxation year if, at the end of the year or immediately before the trust ceases to exist, it has a resident contributor or both a resident beneficiary and a connected contributor.

The contributor to a non-resident trust is a person that makes a contribution of property to the trust by means of a loan or transfer, other than an arm's length transfer). However, a person may also be considered to be a contributor to a trust if, as applicable:

• the loan or transfer (other than an arm's length transfer) of property by the person or the partnership of which the person is a member is to another person or partnership in circumstances where the loan or transfer generates, at that time, either an increase in the fair market value (FMV) of one or more properties held by the trust or a decrease in a known or contingent liability of the trust;
• the loan of property or the transfer of restricted property, other than an arm's length transfer, by the person or the partnership of which the person is a member is to another person or partnership and, at that time or at a later time, the trust holds property whose FMV is derived, in whole or in part, directly or indirectly, from property held by the other person or partnership.

If a non-resident trust is considered to be a revocable or blind trust for property it received, either directly or indirectly, from an individual resident in Québec or a corporation that has an establishment in Québec, the transfer or loan of the property to the trust is deemed to be a transfer or loan of restricted property. The trust may then be subject to the presumption of residency. See Revocable or blind trust for more information.

The presumption of residency does not apply to a non-resident trust that is designated as a qualified disability trust (QDT). For more information, see Qualified disability trust.

Sections 595(f) and 596

If the presumption of residency applies to a non-resident trust for a taxation year, the trust is deemed to be resident in Canada throughout the year. This presumption applies to:

• the calculation of income tax and the foreign tax credit (see “Income from Canadian and foreign sources” below);
• the tax treatment further to certain elections made in the federal income tax return (see Losses – Election referred to in section 1054 of the Taxation Act for the first taxation year of a GRE, Income or taxable capital gain that was paid or that became payable in the year to a beneficiary but was reported by the trust, and Accumulating income allocated to a preferred beneficiary);
• certain rules, such as the presumption concerning trust income for the benefit of a beneficiary under 21 years of age and the designation of certain income or capital gains allocated to the beneficiaries.

Such a trust will therefore have to file the Trust Income Tax Return (form TP-646-V) and RL-16 slips if it has a resident contributor or both a resident beneficiary and a connected contributor at the end of the taxation year. The trust and each resident contributor or beneficiary are solidarily liable in matters pertaining to the trust's fiscal rights and obligations.

The two elections listed below can be made to decrease the tax burden of a deemed resident trust.

Election to create a non-resident portion trust

The non-resident portion of a deemed resident trust corresponds to all property of the trust that is not part of the resident portion of the trust.

If a trust holds a non-resident portion in a taxation year in which the trust is a deemed resident trust, it can make an election, under federal legislation, to have the non-resident portion of the trust deemed to be held by another trust that is an inter vivos trust referred to as a “non-resident portion trust.”

The election takes effect as of the first taxation year in which the deemed resident trust holds a non-resident portion.

As of that time, the following conditions apply to the trusts:

• The non-resident portion trust continues to exist until the deemed resident trust:
  • no longer has a resident contributor or a resident beneficiary;
  • becomes an exempt foreign trust;
  • ceases to exist; or
  • becomes resident in Canada.
• The terms that apply to the deemed resident trust also apply to the non-resident portion trust.
• The trustees of the deemed resident trust are the trustees of the non-resident portion trust.
• The non-resident portion trust is deemed to have neither a resident contributor nor a connected contributor.

The first taxation year of a non-resident portion trust corresponds to the taxation year of the deemed resident trust as of which the election applies.

Election to be an electing contributor

The resident contributor of a deemed resident trust can make an election, under federal legislation, to be an electing contributor. If 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 completed in the name of the contributor. You can deduct an amount equal to the property income amount on line 81 of the trust's income tax return.

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 moment of the election, or as of the taxation year that ends before this moment, and for all subsequent years.

3.2.3. Non-resident trust

A trust that was not resident in Canada at any time in a taxation year is subject to Québec income tax if, at some time in the taxation year, one of the following conditions is met:

• The trust carried on a business in Québec.
• The trust disposed of taxable Québec property.
• The trust disposed of taxable Québec property and included in its income a provision deducted in the previous year.
• The trust was a specified trust that owned a specified immovable or that was a member of a partnership that owned such an immovable (see “Specified immovable held by a non-resident trust” below).
• The trust owned property that it used in carrying on a business in Québec, and the total of the cost amounts of its property exceeded $250,000.

Such a trust must file an income tax return even if it has no income tax payable for the year. However, such a trust that carried on a business in Québec (and that does not meet any of the other conditions above) will not be required to file an income tax return if it has no income tax payable for a year, unless it has no income tax payable solely because it carried forward a loss sustained in a previous year.

Note that a non-resident trust may be deemed to be a resident trust, and may therefore be required to file an income tax return. For more information, see Deemed resident trust.

Sections 26 and 1000

Specified immovable held by a non-resident trust

An inter vivos trust that is not tax-exempt and that is not resident in Canada at any time in the year (referred to as a “specified trust” below) must pay income tax at a rate of 4.47% on the net income derived from the rental of a specified immovable (including the trust's share of such income from a partnership of which the trust is a member, if applicable). For more information, see Specified trust and Schedule F – Income Tax Payable by a Specified Trust for a Specified Immovable.

If such a trust becomes resident in Canada at some time in the year, any specified immovable that it owned at that time is deemed to have been disposed of immediately before it became resident in Canada for proceeds equal to the FMV of the immovable at that time. For more information, see Trust that becomes resident in Canada.

3.2.4. Income tax instalments

We send form TPZ-1026.F-V, Instalment Payments Made by a Trust, to trusts that have to pay income tax instalments to notify them of the amount of the instalments. Trusts must make payments of more than $10,000 electronically (for example, online or through a financial institution), unless there is a specific reason they cannot. Failure to comply may result in a penalty.

A trust (with the exception of a GRE) must pay income tax instalments for the taxation year if:

• it estimates that its net income tax payable for the year will exceed $1,800; and
• its net income tax payable for one of the two previous years exceeded $1,800.

If the trust's principal source of income is farming or fishing, it must pay a single income tax instalment for the taxation year if:

• it estimates that its net income tax payable for the year will exceed $1,800; and
• its net income tax payable for the two previous years exceeded $1,800.

The net income tax payable for a given year corresponds to the income tax payable for the year minus the total income tax withheld and the refundable tax credits obtained for the year.

Quarterly instalments must be made by March 15, June 15, September 15 and December 15 of the year. Each instalment must be equal to a quarter of the estimated income tax payable for the year or of the income tax payable for the previous year. However, if a trust's principal source of income is farming or fishing, the trust must pay a single instalment by December 31 of the year. The instalment must be equal to two-thirds (2/3) of the estimated income tax payable for the year or of the income tax payable for the previous year.

If the trust wants to calculate the amount of its instalment payments itself, it can complete form TP-1026.F-V, Calculation of Instalment Payments to Be Made by Trusts. However, it may have to pay interest if it calculated the amount of its instalment payments itself and the amount turns out to be insufficient.

Note that if the trust is required to make instalment payments for 2025, we will charge interest, compounded daily, on any payment (or portion thereof) that is not made by the required date.

SIFT trust

A specified investment flow-through trust (SIFT trust) must calculate and make instalment payments of income tax as if it were a public corporation. Accordingly, the SIFT trust must make instalment payments on a monthly basis, by the last day of each month, if its estimated income tax payable for the year and its income tax payable for the previous year both exceed $3,000. For more information, see Specified investment flow-through trust.

Sections 1025 to 1027

3.2.5. Exemption from filing the trust income tax return

Certain trusts are exempt from filing the Trust Income Tax Return (form TP-646-V).

Section 998

This is the case for the following trusts:

• a trust established under a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF), except if it must pay income tax under Part I of the Taxation Act, such as:
  • income tax on income derived from the operation of a business or from a non-qualifying investment, or on the capital gain derived from the disposition of such an investment, or

  • income tax on the taxable income for any taxation year after the year that follows the year of death of the last annuitant of the plan or fund (the trust must file an RL-2 slip for any amount paid as a tax-paid amount);

    Sections 905.1, 919 to 921.2 and 961.12 to 961.16.1

• a trust established under a tax-free savings account (TFSA) or a first home savings account (FHSA), except if the trust must pay income tax on income derived from the operation of a business or from a non-qualifying investment, or on the capital gain derived from the disposition of such an investment (the trust must file RL-1 slips for persons to whom it pays investment income earned following the death of the account holder);

  Note Trust established under a TFSA or FHSA

  The TFSA or FHSA holder, the trust and the issuer are solidarily liable for the payment of the income tax on the income from the operation of a business by a trust established under a TFSA or an FHSA. The solidary liability of an issuer of a TFSA or FHSA at any time in respect of business income earned by the TFSA or FHSA is limited to the value of the property held in the TFSA or FHSA they control at that time as legal representative of the trust plus the amount of all the distributions of property from the TFSA or FHSA as of the date on which the notice of assessment was issued.

  Sections 935.21 to 935.23, 935.24.1 and 935.31 to 935.35

• a trust established under a profit-sharing plan (PSP) (the trust must nonetheless file RL-25 slips);

  Sections 855, 859, 860 and 863 to 868

• a trust established under a deferred profit-sharing plan (DPSP), a registered pension plan (RPP) or a registered supplementary unemployment benefit plan (RSUBP);

  Sections 880, 963 and 998(d)

• a trust established under a pooled registered pension plan (PRPP), including a voluntary retirement savings plan (VRSP), except if the trust must pay income tax on income derived from the operation of a business (see “RL-1 slips – Accumulated income and educational assistance payments” below);

  Sections 965.0.20 and 965.0.21

• a retirement compensation arrangement trust, except for the portion that constitutes an employee benefit plan;

  Sections 209.1, 209.3, 890.5 and 890.8

• a trust established under a registered education savings plan (RESP), except if:

  • a tax is payable under Part I of the Taxation Act with respect to property the trust holds that is not a qualifying investment for it or to a capital gain derived from the disposition of such property,
  • a special tax is payable under Part III.15.1 of the Taxation Act;
  RL-1 slips – Accumulated income and educational assistance payments

  In all cases, the trust must file RL-1 slips for accumulated income payments and educational assistance payments.

  End of note

  Sections 901, 901.1, 904, 904.1, 1129.66.2 and 1129.66.4 to 1129.66.6

• a trust established under a registered disability savings plan (RDSP), except if a tax is payable under Part I of the Taxation Act on certain loans it took out, due to the operation of a business, or with respect to property it holds that is not a qualifying investment for it or to a capital gain derived from the disposition of such property;

  Note

  In all cases, the trust must file RL-1 slips for disability assistance payments.

  Sections 905.0.9 to 905.0.12 and 905.14

• an environmental trust, that is, a trust that is maintained solely to finance the reclamation in Canada of a site that is or has been used principally for one or more of the following purposes:

  • the operation of a mine,
  • the extraction of clay, peat, sand, shale or aggregates (including dimension stone and gravel),
  • the deposit of waste,
  • the operation of a pipeline, if the trust was created after December 31, 2011;
  Note

  An environmental trust that is a resident in Québec at the end of the taxation year must nonetheless file form TP-1129.53-V, Income Tax Return for Environmental Trusts, in accordance with Part III.12 of the Taxation Act. For the purposes of this Part, an environmental trust is deemed to be resident in the province in which the site in respect of which the trust is maintained is situated.

  End of note

  Note Trust that ceases to be an environmental trust

  If a trust ceases to be an environmental trust:

  • its taxation year is deemed to end immediately before that time;
  • it is deemed to have disposed of all its property at its FMV immediately before that time and to have reacquired it immediately after that time at a cost equal to the proceeds of disposition; and
  • it ceases to be exempt from the requirement to pay income tax under Part I of the Taxation Act.

  End of note

  Sections 692.3, 736, 736.0.2, 736.0.3.1, 999.1 and 1129.51 to 1129.54

• a trust governed by an eligible funeral arrangement or a cemetery care trust (the trust must nonetheless file an RL-3 slip for any amount to be included in the income of a beneficiary).

  Section 979.21

The following entities are also exempt from filing the Trust Income Tax Return (form TP-646-V):

• a registered charity, which must nonetheless file form TP-985.22-V, Information Return for Registered Charities and Other Donees;
• a tax-exempt entity that is an agricultural organization, a board of trade (chamber of commerce), or a non-profit organization (club, society or association) that is not considered to be a charity.

However, the latter must file form TP-997.1-V, Information Return for Tax-Exempt Entities, if any of the following apply:

• the total amount of taxable dividends or the total amount of interest, rentals or royalties that the entity received or was entitled to receive during its fiscal period was more than $10,000;
• at the end of the previous fiscal period, the entity's total assets, determined according to generally accepted accounting principles, exceeded $200,000; or
• the entity was required to file form TP-997.1-V for a previous fiscal period.

Sections 985.23, 995, 996 and 997.1

3.3. Filing requirements

3.3.1. Filing deadline

As a trustee, you are responsible for filing the Trust Income Tax Return (form TP-646-V).

You must file the return along with the required documents (see Documents to file) within 90 days after the end of the trust's taxation year. You must also pay any income tax payable and remit copies of the RL-16 slips to beneficiaries within the same time period.

Trusts that file the return late are liable to a penalty of 5% of the income tax that remains unpaid on the filing deadline, and to an additional penalty of 1% of the unpaid income tax for each full month the return is late, to a maximum of 12 months.

Note that if the filing deadline falls on a Saturday, Sunday or statutory holiday, the deadline is extended to the following business day.

When determining the amount of unpaid tax for the purposes of calculating a penalty, we take into account any losses carried forward from a previous taxation year (lines 91 and 92).

Public trusts – Obligation to post information online

Public trusts must provide certain information in the prescribed form and by the prescribed deadline, including allocations and designations of income to beneficiaries and distributions of capital in their favour. Such information must be posted on the website of the Canadian Depository for Securities no later than 60 days after the end of the taxation year concerned.

However, if the trust meets the requirements to be considered a public investment trust, it must post such information no later than 67 days after the end of the calendar year in which the taxation year ended.

If the trust is a public trust, check box 22 of the return.

Sections 1045 and 1086R57

3.3.2. Documents to file

All documents that apply to the trust's situation must accompany the trust income tax return. The accompanying documents will vary depending on whether the return filed is a computer-generated return or a return completed on paper. If the return is filed using software, refer to the document entitled Information for Software Users: Trusts (IN-416.A-V) to find out which documents must be submitted. If the return is filed on paper, please submit the following documents, where applicable:

• the schedules of the return:
  • Schedule A, Taxable Capital Gains and Designated Net Taxable Capital Gains,
  • Schedule A.1, Election for Certain Trusts Regarding Taxable Capital Gains,
  • Schedule B, Investment Income, Gross-Up of Dividends Not Designated and Adjustment of Investment Expenses,
  • Schedule C, Summary of Allocations and Designations,
  • Schedule D, Carry-Back of a Loss,
  • Schedule E, Income Tax on the Taxable Distributions Amount and Calculation of Eligible Dividends to Be Designated,
  • Schedule F, Income Tax Payable by a Specified Trust for a Specified Immovable;
• certain forms, such as:
  • TP-128.F-V, Income Earned by a Trust From the Rental of Immovable Property,
  • TP-1086.R.23.12-V, Costs Incurred for Work on an Immovable,
  • TP-274.F-V, Designation of Property as a Principal Residence of a Personal Trust,
  • TP-668.1-V, Taxable Capital Gains of a Trust That Give Entitlement to a Deduction,
  • TP-671.9-V, Information Return of the Beneficiary of a Designated Trust,
  • TP-772-V, Foreign Tax Credit,
  • TP-776.42.F-V, Alternative Minimum Tax of a Trust,
  • TPZ-1179-V, Logging Operations Return,
  • TP-1079.DI-V, Mandatory Disclosure of a Confidential Transaction or a Transaction Involving Conditional Remuneration or Contractual Coverage,
  • TP-80.1-V, Calculation of Business or Professional Income, Adjusted to December 31,
  • TP-750-V, Income Tax Payable by a Trust Resident in Québec That Carries On a Business in Canada, Outside Québec, or by a Trust Resident in Canada, Outside Québec, That Carries On a Business in Québec,
  • TP-1129.64-V, Special Tax Relating to a Registered Education Savings Plan,
  • TP-768.1-V, Recovery Tax: Qualified Disability Trust,
  • TP-163.1-V, Interest Paid on a Loan Taken Out on a Life Insurance Policy,
  • TP-653-V, Deemed Sale Applicable to Certain Trusts,
  • TP-1031.1-V, Election by a Trust to Pay in Instalments the Income Tax Resulting From a Deemed Sale Applicable to Certain Trusts,
  • TP-1033.18-V, Election to Defer the Payment of Income Tax Resulting From the Deemed Disposition of a Trust's Interest in a Qualified Public Corporation,
  • TP-726.30-V, Income Averaging for Forest Producers,
  • TP-21.4.39-V, Cryptoasset Return;
• all RL slips and other information slips received by the trust;
• all receipts for donations and gifts, and, if applicable, the following documents:
  • form TPF-712.0.1-V, Certificate of Disposition of Cultural Property, issued by the Conseil du patrimoine culturel du Québec,
  • form T871, Cultural Property Income Tax Certificate, issued by the Canadian Cultural Property Export Review Board, or the notice issued by the Conseil du patrimoine culturel du Québec,
  • form TPF-712.0.2-V, Certificate for a Gift of Land or a Servitude with Ecological Value, issued by the Ministère de l'Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs;
• the FMV certificate issued by the Ministère de la Culture et des Communications;
• the FMV certificate issued by the Ministère de l'Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs;
• the certificate issued to a trust that is a certified forest producer under the Sustainable Forest Development Act and that is asking to average a portion of the income derived from a private forest;
• copies of the RL-16 slips issued by the trust, regardless of whether they were submitted online (in an XML file), by mail or by other means (on paper);
• a copy of one of the following documents, if the trust is filing the return for the first time and such a document has not already been sent:
  • the will, accompanied by a list of the assets at the time of death (refer to the note below),
  • the trust deed,
  • the document confirming the trust's existence, in the case of a deemed trust;

• proof that an election (for example, the election concerning the portion of the income or the capital gain paid or that became payable in the year to a beneficiary or the election concerning the portion of the accumulating income allocated to a preferred beneficiary) was filed with the Canada Revenue Agency (CRA) (see Income or taxable capital gain that was paid or that became payable in the year to a beneficiary but was reported by the trust and Accumulating income allocated to a preferred beneficiary).

   Note

  • If there is no testamentary provision designating a liquidator or the designated liquidator does not want to or cannot fulfil their responsibilities in respect of a succession, you must enclose form LM-14.1-V, Designation of a Liquidator by the Heirs, with the succession's first income tax return.
  • If the trust fails to send us, by the prescribed deadline, a copy of any document filed with the CRA, it will be liable to a penalty of $25 per day, up to $2,500.

  End of notes

  Section 21.4.7

The schedules and forms are generally updated every year. If you are required to file a return for a given taxation year (for example, 2025) before the appropriate version of the documents becomes available, you can complete the version for the previous taxation year (that is, 2024), taking into account any new tax measures in effect for 2025 and replacing 2024 with 2025 at the top of the return and each schedule. If you are filing a return for 2024 or for a previous taxation year, you must complete the version of the return for the year concerned (other tax measures may have been introduced since then). You can print out the version of form TP-646-V you need or order it online or by telephone.

RL-16 slip

If the trust is required to file an income tax return, it must also file an RL-16 slip for each beneficiary (including beneficiaries not resident in Québec) to whom it allocated a capital gain or income (see points 1 through 5 under Allocations of amounts).

It is not necessary to file an RL-16 slip for a given beneficiary if the amount of income to be allocated to the beneficiary does not exceed $100. However, the beneficiary must be informed of the amount allocated, since the beneficiary is required to report any amount allocated, even if no RL slip was issued

Certain trusts must file other types of RL slips (see Types of trusts for information concerning employee trusts and employee benefit plans).

A trust resident in Canada, outside Québec, at the end of a taxation year must file an RL-16 slip for each beneficiary resident in Québec to whom it allocated a capital gain or income, even if it was not required to file an income tax return for that taxation year. In this case, only Schedule C needs to be completed and enclosed with the RL-16 slip.

Make sure you always use the version of the RL-16 slip that corresponds to the version of the income tax return in effect for the taxation year concerned. For example, you must use the 2024-10 version of the RL-16 slip when filing a return for the 2024 taxation year or with the return filed for 2025 if the 2025 version of the RL-16 slip is not yet available.

You should always consult the version of this guide and the Guide to Filing the RL-16 Slip (RL-16.G-V) for the taxation year concerned.

You have to include the trust's identification number and account number only on the copy of the RL-16 slip sent to us. If the numbers are not provided, the trust is liable to penalties. Do not include the numbers on the copy you send to the trust's beneficiaries.

Where to send the documents

The return, schedules, forms and related documents must be sent to us on paper, by mail or by other means, at the address below that is closest to the trust's place of residence:

• 3800, rue de Marly, Québec (Québec) G1X 4A5
• C. P. 3000, succursale Place-Desjardins, Montréal (Québec) H5B 1A4

3.3.3. Format of the trust income tax return

You can complete the Trust Income Tax Return (prescribed form TP-646-V) on paper. To do so, download and print out the PDF version or order the return online.

Another option is to use the fillable PDF version, which you can print once it is completed.

To file a computer-generated copy of the trust income tax return, you must get authorized software from a software developer. For more information, see Information for Software Users: Trusts (IN-416.A-V).

For more information on filing RL-16 slips, see the Guide to Filing RL-16 Slips: Trust Income (RL-16.G-V).

3.4. Reassessments

We examine the trust income tax return, schedules and forms received, then issue a notice of assessment.

However, we may review the return and issue a notice of reassessment within:

• three years (four years in the case of a mutual fund trust) after the later of the following dates:
  • the mailing date of the original notice of assessment or of the notification that no income tax was payable for the taxation year,
  • the year the return is filed;
• six years (seven years in the case of a mutual fund trust) after the later of the aforementioned dates, if the trust requests the carry-back of certain deductions or changes the amount of such a carry-back (such as if the trust completes Schedule D to request the carry-back of a net capital loss or a non-capital loss).

For taxation years ending after October 2, 2016, we may issue a notice of reassessment after the expiry of the normal reassessment period if the trust (or a partnership of which the trust is a member) does not inform us of the disposition of its immovable property in its income tax return filed for the year the disposition occurred (or in the information return of the partnership, where applicable).

We may suspend or extend the prescription period for issuing a notice of reassessment in the cases described below.

3.4.1. Formal demand related to the general anti-avoidance rule

If a notice of reassessment is issued under the general anti-avoidance rule to a trust that is the subject of a formal demand concerning unnamed persons, the prescription period for issuing such a notice is suspended:

• as of the day the judge granted the authorization to send the formal demand if the application for authorization was filed with a judge of the Court of Québec after November 10, 2017, but before July 11, 2018;
• as of the day the application for authorization to send the formal demand was filed if the application was filed with a judge of the Court of Québec after July 10, 2018.

3.4.2. Additional provision for the suspension of the prescription period

If, after July 10, 2018, we send a formal demand for information or documents to a named person or if we file an application for an order with a judge of the Court of Québec, the prescription period for issuing a notice of reassessment is suspended as of the earliest of the following dates, regardless of whether the information or documents are held outside Canada:

• the date the formal demand is notified by registered mail or by personal service; or
• the date the application for an order is made.

3.4.3. Notices of assessment for non-resident persons not dealing at arm's length with a trust

If losses are carried back as part of transactions involving a non-resident person who is not dealing at arm's length with a trust, the three-year period for issuing a notice of reassessment is extended by three years as of the date the losses are carried back to a previous year.

This measure applies to a notice of reassessment that concerns the adjustment to the carry-back of a loss if:

• the notice is issued for a taxation year as a consequence of a transaction involving a trust and a non-resident person who is not dealing at arm's length with the trust;
• the notice reduces the loss that the trust can carry back for the taxation year; and
• all or part of the loss was carried back to the previous taxation year.

This measure applies to any taxation year that ends after February 26, 2018, and to which the trust carries back a loss.

3.4.4. Request for an adjustment and refund

If you wish to make changes to a trust income tax return that has already been filed, complete form TP-646.R-V, Request for an Adjustment to a Trust Income Tax Return. You are not required to file a new income tax return for the trust. However, if the requested adjustment changes the allocation of income to the trust's beneficiaries, you must enclose with the form an amended Schedule C and amended RL-16 slips.

If, after processing a request for an adjustment, a reassessment results in the reduction of the trust's balance due and entitles the trust to a refund of income tax, interest or penalties, we must grant the refund if the request was submitted to us within:

• three years (four years in the case of a mutual fund trust) after the end of the taxation year concerned; or
• six years (seven years in the case of a mutual fund trust) after the end of the taxation year concerned, if the trust requests the carry-back of certain deductions or changes the amount of such a carry-back.

In certain cases, we have the discretionary power to issue a refund without taking into account the above time periods. We will generally accept a request for an adjustment submitted to us within six years (eight years in the case of a mutual fund trust) after the end of the taxation year concerned.

Only a GRE can request a refund after the expiry of the prescribed period, provided the adjustment request is submitted before the end of the 10th calendar year after the taxation year concerned. For example, if the taxation year concerned is 2014, you have until the end of the 2024 calendar year to request an adjustment. However, a testamentary trust can request an adjustment for taxation years ended before December 31, 2016.

We may not issue a refund if the request for an adjustment aims to increase a deduction, where the trust initially elected not to claim the maximum amount allowed. We will also not issue a refund if the request is made for retroactive tax planning purposes.

Sections 1010 and 1051

3.5. Registers and supporting documents

Any trust that carries on a business or is required to deduct, withhold or collect an amount under a fiscal law must keep registers and supporting documents at its establishment or any other location designated and authorized by us. The registers and documents must contain the information we need to determine any sum that must be deducted, withheld, collected or paid by the trust under a fiscal law. We must have access to the registers and documents if we do an audit. Regardless of how the information is stored, registers and supporting documents must include:

• the trust deed;
• the will or declaration of heredity, together with a list of the assets at the time of death;
• invoices, receipts and other documents substantiating the information that is or should be entered in a register;
• any document to compile information for accounting, financial, fiscal or legal purposes, including the general journal, special journals, and the inventory of property, drawn up in the prescribed manner.

As a rule, registers and supporting documents must be kept for a period of six years after the last year to which they apply. If registers and supporting documents are kept on an electronic or computer medium, the trust must keep them in an intelligible form on the same medium for the same period. Moreover, the trust must take all necessary measures to ensure and maintain their integrity throughout this period.

Any trust that obtains a tax relief (deduction in the calculation of income, tax exemption for income, tax credit, etc.) must keep the supporting documents for the relief for a period of six years after the last year to which they apply. Registers and supporting documents must be kept more than six years if the trust filed a notice of objection, a contestation or an appeal under tax legislation.

In all cases, the Minister of Revenue of Québec may authorize in writing that the documents be destroyed before this time period has expired.

Sections TAA 1.0.1, TAA 34 and the following

3.6. Certificate authorizing the distribution of property

A trustee who is preparing to liquidate a trust must notify us that they intend to distribute the trust's property to the beneficiaries and get a certificate authorizing them to proceed with the distribution. To get the certificate, the trustee has to file form MR-14.B-V, Notice Before Distribution of Property.

The liquidator of a succession has to file form MR-14.A-V, Notice Before Distribution of the Property of a Succession, before distributing post-death income or the deceased person's property.

You can file form MR-14.A-V at the same time as the income tax returns for the type of distribution for which you are requesting an authorization certificate. In other words, to obtain a certificate authorizing you to:

• distribute the deceased person's property, you must file the deceased person's income tax return(s) (form TP-1-V) for the year of death;
• distribute the succession's post-death income, you must file the Trust Income Tax Return (form TP-646-V) for the taxation year(s) beginning after the death and ending on the date the succession was liquidated;
• distribute the deceased person's property and the succession's post-death income, file the deceased's income tax return(s) (form TP-1-V) for the year of death, as well as form TP-646-V for the taxation year(s) beginning after the death and ending on the date the succession was liquidated.

If you have not already done so, you must send a copy of a document proving that you are the liquidator of the succession.

Anyone who distributes another person's property without having first obtained a certificate authorizing them to do so becomes personally liable for any amounts owed to us, up to the value of the property distributed. However, in the case of a succession, the liquidator of a succession may pay urgent or essential expenses (up to $12,000) before filing form MR-14.A-V without incurring any liability. These expenses can result directly from the death (for example, funeral expenses) or they can be made in the interests of the succession (for example, expenses for electricity, heating, insurance and urgent repairs).

Sections TAA 14 and TAA 14.0.0.1

3.6.1. GST/HST clearance certificate

If the trust is a GST/HST registrant, the person that distributes the property of another person must complete the Application for a GST/HST Clearance Certificate (form FP-352-V) to obtain a GST/HST clearance certificate. Any person that distributes the property without having obtained a clearance certificate will be personally liable for paying the GST/HST up to the value of the property or money distributed.

3.6.2. Final return

The taxation year of a GRE that is wound up ends on the winding-up date (line 11), which is generally the date of the distribution of the property. You have to file the final return of the trust within 90 days after the winding-up date.

In the case of a trust other than a GRE, you must file the final return no later than 90 days following the calendar year in which the trust was wound up.

3.7. Types of trusts

The trusts described in this section are presented in alphabetical order. All the trusts are either testamentary trusts or inter vivos trusts. This distinction is important for tax purposes.

A testamentary trust is a trust or a succession that arises on the death of an individual and as a consequence thereof. The terms of such a trust are created by will, by law, or by court order (for example, pursuant to the application of legislation providing for an obligation of support on behalf of dependants).

A trust created by a person other than the deceased is not a testamentary trust.

A trust may lose its status as a testamentary trust further to one of the following events:

• The property or income of the trust was not distributed to beneficiaries in accordance with the terms of the will.
• The trust was created after November 12, 1981, and property was contributed to the trust otherwise than by succession before the end of the taxation year.
• The trust was created before November 13, 1981, and:
  • after June 28, 1982, property was contributed to the trust otherwise than by succession; or
  • before the end of the taxation year, the fair market value (FMV) of all property that was contributed to the trust, otherwise than by succession, exceeds the FMV of the property that was contributed by succession (the FMV of the property is the value of the property at the time it was acquired by the trust, including property that was substituted for such property).
• Before the end of the taxation year, the trust incurs:
  • a debt (or any other obligation to pay an amount) owed to a beneficiary (or any person or partnership not dealing at arm's length with a beneficiary); or
  • a debt (or any other obligation to pay an amount) guaranteed by a beneficiary (or any person or partnership not dealing at arm's length with a beneficiary).

This restriction does not apply to a debt (or any other obligation) owed to a beneficiary and incurred in satisfaction of the beneficiary's right to enforce payment by the trust, before the debt is owed, of an amount on the trust's income, capital gains, or capital.

A testamentary trust keeps its status if it receives a contribution from another trust, provided the following conditions are met:

• The testamentary trust is a graduated rate estate (GRE).
• The income of the other trust became payable to the individual upon the death of the beneficiary of the testamentary trust as a result of a joint election made by the other trust and the legal representative who is administering the succession.
• The amount is paid to cover the income tax payable upon the death of the beneficiary of the trust.
• The amount paid does not exceed the income tax payable upon the death of the beneficiary of the trust.

A trust other than a testamentary trust is an inter vivos trust.

Sections 677 and 677.1

3.7.1. Alter ego trust

An alter ego trust is a trust created after 1999 by an individual aged 65 or over. The individual has the exclusive right to receive all income from the trust. No other person, during the individual's lifetime, may receive or otherwise obtain the use of any part of the trust's income or capital.

The rollover rule may apply to transfers of property made to the trust by the settlor, in which case any immediate tax incidence can be avoided (see Qualifying transfer).

However, such a transfer may be subject to the income attribution rule. In this case, the settlor, not the trust, may have to report the income (or loss) derived from the transferred property or the capital gain (or loss) derived from the subsequent disposition of the property (see Revocable or blind trust).

Since 2016, the following rules have applied to alter ego trusts for the taxation year during which the beneficiary dies:

• The trust's taxation year is deemed to end at the end of the day of death, and a new taxation year is deemed to begin at the start of the following day.
• The trust's income for the year is taxable in the trust's income tax return.
• The deadline for paying the trust's income tax and filing its income tax return and RL-16 slips is the 90th day of the year following the calendar year during which the trust's taxation year ended.

You must check box 28 of the trust income tax return if the trust is an alter ego trust and the beneficiary died in the taxation year concerned. You must also enter the date of the beneficiary's death.

Section 652.1 and 663.0.1

3.7.2. 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 they are 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;
• an arrangement has been made between the athlete and an issuer as described in the definition of “qualifying arrangement” (under 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 Part I of the Taxation Act, an amateur athlete trust is not required to pay income tax on its income. However, it must file an income tax return and an RL-16 slip 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).

End of the trust

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 eight-year period ended and that the trust allocated to the beneficiary an amount equal to the 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. Where the trust is required under Part XII.2 of the federal Income Tax Act to pay income tax for the taxation year, the amount allocated to the beneficiary is reduced to 64% of the FMV of the trust's property at that time.

Sections 851.34 to 851.36, 998(n) and 1086R57

3.7.3. Deemed trust

A usufruct, a right of use or a substitution is considered to be a trust. If the usufruct, right of use or substitution was established by will, the trust is considered to be a testamentary trust, and the property subject to the usufruct, right of use or substitution is considered to have been transferred to the trust on the death of the testator and as a consequence thereof.

Furthermore, an arrangement under which property is subject to rights and obligations is considered to be a trust if the arrangement is established by or pursuant to a written contract in which the parties express their intention to consider the arrangement as a trust within the meaning of Part I of the Taxation Act.

A person who has a right, whether immediate or future and whether absolute or contingent, to receive all or part of the income or the capital from the property referred to in the previous paragraph is the beneficiary of the trust in question.

Where a taxpayer makes a gift of a work of art or cultural property with reserve of usufruct or right of use to a qualified donee, the usufruct or right of use is not considered to be a trust where:

• the gift is made during the taxpayer's lifetime;
• the gift is not a gift of immovable property;
• the usufruct or right of use was established exclusively for the benefit of the taxpayer; and
• the donor was the sole owner of the property immediately before it was donated.

Such a gift may give rise to tax relief for the donor.

Sections 7.9 to 7.11

3.7.4. Employee benefit plan

An employee benefit plan is an arrangement under which an employer remits contributions to another person, referred to as the “custodian of an employee benefit plan,” in order to pay benefits to employees, former employees or persons not dealing at arm's length with an employee or former employee, or to pay such benefits on their behalf.

The employer may deduct employer contributions to the plan only if they are distributed to the beneficiaries of the plan (that is the employees, or former employees, or their legatees by particular title) or their legal representatives. The beneficiaries must include in their income the amount of the benefits received during the year, minus the portion of this amount that constitutes their contributions to the plan.

An amount received by a beneficiary of the plan, who is a person not dealing at arm's length with an employee, is deemed to have been received by the employee if the beneficiary receives it by reason of the employee's office or employment and if the employee is alive at the time the beneficiary receives the amount.

As a rule, the benefits paid by the plan are considered to be employment income for the beneficiaries. They must be reported on RL-1 slips (rather than on RL-16 slips). The total amount of benefits must be entered on form RLZ-1.S-V, Summary of Source Deductions and Employer Contributions. The RL-1 slips and form RLZ-1.S-V must be filed no later than the last day of February of the year following the year in which the benefits were paid.

If the employee benefit plan is a trust, the trustee must file a Trust Income Tax Return (form TP-646-V) in accordance with the usual rules. A statement of receipts and disbursements for the year must be enclosed with the return, and the receipts (contributions, investment income, etc.) and disbursements must be broken down by type. If, in the taxation year, a portion of the investment income is retained by the trust instead of being allocated to the employees, the trustee must report this income as dividends, taxable capital gains or other investment income, as applicable. This breakdown of income is necessary in order to calculate the dividend tax credit and the alternative minimum tax (AMT), and to carry over net capital losses from other years.

If a trust constituted under an employee benefit plan becomes a retirement compensation arrangement trust, it must still file an income tax return for the portion of the investment income attributable to the plan. The FMV of the plan's property immediately before the change is considered to be a payment out of the plan to the employees or former employees.

Sections 47.1 to 47.4, 47.6, 87(j.1), 135(c), 209.1 to 209.3 and 890.5

3.7.5. Employee life and health trust

A trust is considered to be an employee life and health trust for a given taxation year if it meets all the following requirements throughout the year:

• The trust's only objectives are to:
  • provide employee benefits to current or former employees of one or more participating employers or former participating employers, or on their behalf; and
  • distribute, after the trust has been wound up, the remaining funds to the beneficiaries, other than key employees, according to their interest in the trust.
• All or substantially all of the total cost of the employee benefits applies to designated employee benefits.
• The trust meets either of the following conditions:
  • The trust is resident in Canada.
  • If the trust is not resident in Canada, benefits are provided to employees who are resident in Canada and to employees who are not resident in Canada, one or more participating employers are resident in a country other than Canada, and the trust is resident in a country in which one of the participating employers resides.
• Each beneficiary of the trust is either an employee or former employee of a participating employer or former participating employer, an individual related to an employee or former employee, or another employee life and health trust.
• The trust meets the conditions regarding the proportion of members that are key members.
• The rights of the key employees of a participating employer are not superior to the rights of most of the other beneficiaries.
• The only rights granted to a participating employer (or to a person not dealing at arm's length with the employer) are the following:
  • the right to designated benefits;
  • the right to enforce undertakings, warranties or similar obligations in order to:
    • maintain the trust as an employee life and health trust, or
    • prevent the trust from deducting the designated benefits that became payable during the taxation year because certain conditions were not met.
• The trust is administered in accordance with its terms and objectives.

The following rules apply to employee life and health trusts:

• The trust can deduct designated employee benefits that became payable by the trust in a taxation year. The deduction is included in the calculation of the non-capital losses for that year (see line 513a of Schedule D). However, no deduction is allowed if the benefits for which the contributions or premiums are provided would not be deductible in calculating the employer's income.
• Non-capital losses from one year can be carried back three years or forward seven years. However, the trust cannot carry non-capital losses to a year in which it does not meet one of the following conditions:
  • throughout that year, the trust does not meet all the conditions to be considered an employee life and health trust;
  • designated employee benefits that became payable by the trust in the given year cannot be deducted.

Sections 657, 657.1(d), 727(d), 727.1 and 869.1 to 869.13

3.7.6. Employee ownership trust

An employee ownership trust (EOT) is a form of employee ownership where an irrevocable trust holds shares of one or more businesses for the benefit of its employees.

A trust is considered an EOT if it meets all the requirements, including:

• It is a resident trust in Canada (excluding deemed resident trusts);
• Its objectives are to:
  • hold shares of qualifying businesses for the benefit of the trust's employee beneficiaries;
  • make payments to these employees, the amount of which is determined based on, among other things, the length of their service, their remuneration and the number of hours they worked. 

An EOT must also hold a majority interest in one or more qualifying businesses, and all or substantially all of its assets must be shares in the qualifying businesses.

Generally, the same rules that apply to personal trusts apply to EOTs, including the rule under which dividends received from qualifying businesses retain their character if the EOT distributes them to its beneficiaries. Moreover, such dividends may be eligible for the dividend tax credit. However, an EOT cannot act in the interest of one beneficiary (or group of beneficiaries) to the prejudice of another beneficiary (or group of beneficiaries).

Beneficiaries of the trust must consist exclusively of individuals who:

• are employees of one or more qualifying businesses controlled by the trust (except employees who have not completed a probationary period that cannot exceed 12 months) or former employees (including successions) who were employees, while the trust controlled the qualifying business, of one or more qualifying businesses controlled by the trust (except former employees who had not completed a probationary period that cannot exceed 12 months);
• do not own, directly or indirectly (except through an interest in the trust), shares of the capital stock of a class of a qualifying business controlled by the trust, the value of which is 10% or more of the FMV of the class;
• do not own, directly or indirectly, alone or together with any person or partnership that is related to or affiliated with the individual, shares of the capital stock of a class of a qualifying business controlled by the trust, the value of which is 50% or more of the FMV of the class; and
• immediately before a qualifying business transfer to the trust, did not own, directly or indirectly, alone or together with any person or partnership that is related to or affiliated with the individual, shares of the capital stock or indebtedness of the qualifying business, the value of which is 50% or more of the FMV of the shares of the capital stock and indebtedness of the qualifying business.

Trustees, including corporations that serve as trustees, must be resident in Canada (excluding deemed resident trustees). The trust's beneficiaries (who must be 18 or over) have to elect trustees at least once every five years. Each trustee has an equal vote in the conduct of the trust's affairs.

In addition, no more than 40% of the trust's trustees can be a combination of:

• individuals who, immediately before the EOT acquired control of the qualifying business, owned, directly or indirectly, together with any person or partnership that is related to or affiliated with them, 50% or more of the FMV of the shares of the capital stock or indebtedness of the qualifying business; and
• corporations for which over 40% of the members of the board of directions are persons dealing at arm's length with any person who has, directly or indirectly in any manner whatever, in connection with any transaction or event or series of transactions or events, sold shares of a qualifying business to the trust (or to any person or partnership affiliated with the trust) prior to or in connection with the trust acquiring control of the qualifying business.

A “qualifying business” is a Canadian-controlled private corporation (CCPC) that meets the following conditions:

• All or substantially all of the FMV of its assets are attributable to assets used principally in an active business carried on in Canada.
• It must not carry on its business as a partner to a partnership.
• No more than 40% of its directors are individuals that, immediately before the EOT acquired control of the business, owned, directly or indirectly, together with any related or affiliated person or partnership, 50% or more of the FMV of the shares of its capital stock or indebtedness.
• It is neither related to or affiliated with any person or partnership that, immediately before the EOT acquired control of the business, owned, 50% or more of the FMV of the shares of its capital stock or indebtedness.

A “qualifying business transfer” means the sale of shares of a corporation's capital stock by a taxpayer to an EOT (or to a CCPC that is controlled and wholly-owned by the EOT), if the following conditions are met:

• immediately before the sale, all or substantially all the FMV of the assets of the corporation are attributable to assets (other than an interest in a partnership) that are used principally in an active business carried on in Canada by the corporation or a corporation that is controlled and wholly-owned by the corporation;
• at the time of the sale:
  • the taxpayer deals at arm's length with the trust (or CCPC),
  • the trust acquires control of the corporation, and
  • the trust is an EOT whose beneficiaries are employees of the business;
• at all times after the sale:
  • the taxpayer deals at arm's length with the corporation, trust or CCPC, and
  • the taxpayer does not retain any right or influence that, if exercised, would allow them (whether alone or together with any person or partnership that is related to or affiliated with the taxpayer) to control, directly or indirectly in any manner whatever, the corporation, the trust or any purchaser.

In addition, changes have been made to certain tax rules applicable to other types of trusts, including the following:

• The capital gains reserve for qualifying business transfers to an EOT is ten years. Therefore, a minimum of 10% of the gain can be brought into income each year, creating a maximum ten-year deferral period.
• The repayment period for loans granted to an EOT for a qualifying business transfer has been extended to 15 years.
• EOTs are exempt from the 21-year deemed sale rule that applies to certain trusts. If the trust no longer meets the conditions to be considered an EOT, the 21-year rule applies until the trust meets the conditions again.
• EOTs are not subject to AMT.

3.7.7. Employee trust

In general, an employee trust is an arrangement that the trustee, pursuant to federal legislation, has elected to qualify as an employee trust, under which an employer remits amounts to the trustee for the benefit of employees. If you have made such an election, it is automatically deemed to be made for the purposes of Québec legislation. You must send us proof that the election was made with the Canada Revenue Agency (CRA) and written notification no later than the filing deadline for the income tax return or 30 days after the election was made (whichever is later).

The contributions that the employer remits to the trustee can be deducted by the employer only if the election has been made.

To maintain its status as an employee trust, a trust must allocate to its beneficiaries (the employees), each year, all of its non-business income and all employer contributions for that year. The amounts are allocated as employment income and are taxable for the beneficiaries in the year of the allocation. The trust must report the amounts on RL-1 slips, rather than on RL-16 slips. The trust must also file form RLZ-1.S-V, Summary of Source Deductions and Employer Contributions, for these amounts. The RL-1 slips and form RLZ-1.S-V must be filed with us no later than the last day of February of the year following the end of the trust's taxation year.

Sections 47.1, 47.5, 47.7 to 47.9, 657 and 657.1

3.7.8. Graduated rate estate

A graduated rate estate (GRE) is a succession that, at a given time, meets the following conditions:

• It arose on and as a consequence of an individual's death.
• The given time is no more than 36 months after the death.
• It is a testamentary trust at the given time.
• It designates itself as a GRE for its first taxation year ending after 2015, and no other succession designates itself as such.
• It enters the individual's social insurance number on its income tax return for each taxation year that ends after 2015 and during the 36 months after the individual's death.

The taxation year of the succession is deemed to end on the day it ceases to be a GRE and the end of any subsequent taxation year will be the end of the calendar year.

If the trust is designated as a GRE, you must check box 26 of the trust income tax return and enter the social insurance number of the deceased individual for each taxation year the trust is designated as such.

Section 646.0.1

3.7.9. Health and welfare trust

A health and welfare trust is a trust established by an employer for the purpose of providing health and welfare benefits to its employees. As the tax treatment of such a trust is not explicitly set out in the federal Income Tax Act, we have adopted the CRA's administrative policy for this type of trust to the end of 2021.

As of 2022, health and welfare trusts established before February 28, 2018, that were not converted into employee life and health trusts or wound up are subject to the normal income tax rules for trusts.

Transitional rules are in place for winding-up and conversion to employee life and health trusts.

A health and welfare trust can make one of the following elections:

• It can elect to be converted to an employee life and health trust.
• It can elect to transfer property to an employee life and health trust and have the rollover rules apply.
• It can elect to be deemed an employee life and health trust if it was created under a collectively-bargained plan and it does not yet meet the conditions to be an employee life and health trust. It will be deemed an employee life and health trust until no later than December 31, 2022.

If the trust makes any of these elections, it must enclose a letter with its income tax return to inform us.

3.7.10. Indigenous child and family services settlement trust

As of 2024, income of trusts established under the First Nations Child and Family Services, Jordan's Principle, and Trout Class Settlement Agreement is exempt from income tax. Consequently, payments received by individuals who are beneficiaries of such trusts are not to be included when computing income for tax purposes.

3.7.11. Insurance segregated fund trust

Generally, at the time a segregated fund of an insurer is established, a trust called a “segregated fund trust” is considered to be created with respect to the fund. The property of the segregated fund and the income derived from it are deemed to be the property and income of the trust and the insurer is the trustee of the segregated fund trust.

An income tax return and financial statements must be filed together for each segregated fund.

If some of the segregated fund policies of the trust were held as a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF), a registered pension plan (RPP), a pooled registered pension plan (PRPP), a voluntary retirement savings plan (VRSP) or a tax-free savings account (TFSA), you must take into account in the return and schedules only the portion of the trust's income (and, where applicable, the trust's capital gain or loss) that is to be allocated to beneficiaries other than those that hold funds under such a plan or under a TFSA. Otherwise, complete only Part 1 (lines 1 through 11 only) and Part 7 of the return.

Note that as of 2018, insurers can merge segregated funds on a tax-deferred basis. The rules that apply to the merger of segregated funds are generally the same as those that apply to the merger of mutual funds.

The non-capital losses of a segregated fund can be carried back and included in the fund's taxable income for a taxation year that begins after 2017. However, the use of these losses is subject to the normal limitations for carrying non-capital losses either forward or back.

The use of non-capital losses is restricted following a segregated fund merger, as is the case for mutual fund mergers.

Sections 851.1 to 851.3, 851.16 and 851.19

3.7.12. Joint spousal trust

A joint spousal trust is an inter vivos trust created after 1999 by a spouse who was aged 65 or over at the time, or by both spouses if they were both aged 65 or over at the time. The spouses have the exclusive right, during their lifetimes, to receive all income from the trust. No other person, prior to the death of the surviving spouse, may receive or otherwise obtain the use of any part of the trust's income or capital.

The rollover rule may apply to transfers of property made to the joint spousal trust by the settlor, in which case there is no immediate tax incidence for the settlor. For more information, see Qualifying transfer.

However, such a transfer may be subject to the income attribution rule. In this case, the settlor, not the spouse nor the trust, will have to report the income (or loss) derived from the transferred property or the capital gain (or loss) derived from the subsequent disposition of the property. For more information, see Trust of which the beneficiary is the spouse or a minor and Revocable or blind trust.

Since 2016, the following rules have applied to joint spousal trusts for the taxation year in which the beneficiary dies:

• The trust's taxation year is deemed to end at the end of the day of death, and a new taxation year is deemed to begin at the start of the following day.
• The trust's income for the year is taxable in the trust's income tax return.
• The deadline for paying the trust's income tax and filing its income tax return and RL-16 slips is the 90th day of the year following the calendar year during which the trust's taxation year ended.

You must check box 28 of the income tax return if the trust is a joint spousal trust and the beneficiary of the trust died in the taxation year concerned. You must also enter the beneficiary's date of death.

Sections 652.1 and 663.0.1

3.7.13. Master trust

A trust may be considered a master trust if it makes an election to that effect (by enclosing a letter with its income tax return for its first taxation year) and if, since its creation:

• it has always been resident in Canada;
• its only undertaking has been the investment of funds;
• it has never borrowed money, unless the loan was for a period of 90 days or less and was not part of a series of loans or other transactions and repayments;
• it has never accepted deposits; and
• its only beneficiaries have been trusts governed by a deferred profit-sharing plan (DPSP), an RPP, a PRPP or a VRSP.

A trust that makes such an election is exempt from income tax and is not required to file a return for subsequent taxation years.

Sections 998(c.4) and 998R3

3.7.14. Mutual fund trust

A mutual fund trust is a unit trust whose units are all held and circulate in accordance with the prescribed conditions governing the number of unitholders, the dispersal of ownership of the units and public trading of the units.

Under federal legislation, a trust can elect to be treated as a mutual fund trust from the beginning of its first taxation year if it became a mutual fund trust within 90 days after the end of that taxation year. For the purposes of Québec legislation, no such election can be made unless it is made under federal legislation, in which case it is automatically deemed to be made. Therefore, if the trust makes this election with the CRA, you must send us proof that the election was made and written notification no later than the filing deadline for the income tax return or 30 days after the election was made (whichever is later).

Under federal legislation, a trust can elect to have its taxation year end on December 15 if it is a mutual fund trust on the 74th day after the end of a calendar year and its taxation year (referred to as the “taxation year concerned” below) would normally end on December 31 of the calendar year. For the purposes of Québec legislation, no such election can be made unless it is made under federal legislation, in which case it is automatically deemed to be made. Therefore, if the trust makes this election with the CRA, you must send us proof that the election was made and written notification no later than the filing deadline for the return or 30 days after the election was made (whichever is later). This election has the following tax consequences for the trust:

• Each subsequent taxation year begins on December 16 of a calendar year and ends on December 15 of the following calendar year, unless otherwise provided for in the Taxation Act.
• For the taxation year concerned and each subsequent taxation year:
  • any fiscal period of a business or of a property of the trust that begins in this taxation year must end no later than the end of said taxation year;
  • if the trust is a member of a partnership or the beneficiary of another trust, and if the partnership's fiscal period or the other trust's taxation year ends in the last 16 days of the calendar year, the trust must take into account its share in the income (or losses) of the partnership for that fiscal period or in the income of the other trust for that taxation year;
  • the portion of the trust's income that is paid or payable to unitholders in the last 16 days of the calendar year is deductible for the trust and taxable for the unitholders.

If the trust fails to send us a copy of any document filed with the CRA within the prescribed deadline, it will be liable to a penalty of $25 per day, up to a maximum of $2,500.

In some situations, a mutual fund trust cannot elect to have its taxation year end on December 15, such as when the trust ceases to be resident in Canada or is subject to a loss restriction event.

Under section 1121.1 of the Taxation Act, a mutual fund trust may designate, for the year, an amount in respect of a particular unit, to a maximum of the portion of the cost base reductions of all the units (for example, capital distributions) for previous years that has not been similarly designated for the year, in respect of the other units, or for the previous years, in respect of all the units. As a result of the designation:

• you must report the designated amount on the RL-16 slip of the unit's holder as income and as an adjustment that increases the unit's adjusted cost base; and
• you may claim a deduction in calculating the trust's income.

For taxation years beginning on or after March 19, 2019, a mutual fund trust can no longer, on redemption of the trust's units, deduct the portion of an amount allocated to a unitholder that exceeds the capital gain that would otherwise have been realized by the unitholder if the amount allocated were subtracted from the redemption proceeds. For taxation years beginning after December 15, 2021, a mutual fund trust that is an exchange traded fund or a fund that offers exchange traded funds is subject to special rules that limit the deduction of certain amounts allocated to a unitholder on redemption.

Similarly, a mutual fund trust can no longer, upon redemption of the trust's units, deduct ordinary income allocated to a unitholder if the amount allocated is subtracted from the redemption proceeds.

Since March 22, 2017, the mutual fund merger rules have been extended to facilitate the reorganization of a mutual fund corporation that is structured as a switch corporation into multiple mutual fund trusts on a tax-deferred basis. The exchange of a unit of a mutual fund trust for another unit of that trust may qualify for a tax deferral.

A switch corporation is a mutual fund corporation with multiple classes of shares. Each class of shares is usually a distinct investment fund.

To qualify for the tax deferral, with respect to each class of shares of the mutual fund corporation that is or is part of an investment fund, all or almost all of the assets allocable to that class must be transferred to a mutual fund trust after March 21, 2017. In addition, the shareholders of that class must become unitholders of that mutual fund trust.

Sections 21.4.7, 649, 785.4, 1120, 1120.0.02 and 1121.1 and the following

3.7.15. Non-profit organization

An organization, such as a club, society or association that is established and operated exclusively for non-profit purposes, is generally exempt from income tax if no portion of its income is payable or otherwise made available to a proprietor, member or shareholder, unless the proprietor, member or shareholder is a club, society or association whose main object is the promotion of amateur athletics in Canada. Such an organization may nonetheless be required to file a return as a tax-exempt entity (see the last paragraph under Exemption from filing the trust income tax return).

If the main purpose of the organization is to provide dining, recreational or sports facilities to its members, a trust is considered to have been created with respect to the organization's property (see Obligation to file the Trust Income Tax Return (form TP-646-V) to determine whether the organization has to file the return).

If the trust has been created for this purpose, only the following should be included in the calculation of its income:

• income and losses derived from the organization's property; and
• capital gains and losses from the disposition of property that was not used exclusively and directly in the pursuit of the organization's main objective.

Such a trust is entitled to an additional deduction of $2,000 in the calculation of its taxable income (line 94 of the return).

Sections 986, 996, 997 and 997.1

3.7.16. Personal trust

A personal trust is:

• a GRE; or
• a trust created gratuitously in which no beneficiary right was acquired for consideration to be paid, directly or indirectly, to the trust or to a person or partnership that contributed to the trust, in order to acquire a beneficial interest. The settlor may acquire all the interests in the trust without the trust losing its status as a personal trust. The same is true for settlors that are related to each other.

Sections 649.1 and 651.3

3.7.17. Qualified disability trust

A qualified disability trust (QDT) is a trust that, for a given taxation year (the “trust year” below) meets the following conditions:

• It is a testamentary trust that arose on and as a consequence of an individual's death.
• It is resident in Canada throughout the trust year.
• It makes a joint election (using the prescribed form), with one or more electing beneficiaries, to be considered a QDT.
• It provides the social insurance number of each of the electing beneficiaries in its income tax return.
• Each electing beneficiary meets the following conditions:
  • The beneficiary is an individual designated as a beneficiary in the instrument that established the trust.
  • The beneficiary did not make a joint election with another trust, for a taxation year of a trust ending during the beneficiary's taxation year, to designate that trust as a QDT.
• The trust did not pay or distribute any amount in the form of capital to a beneficiary who is not an electing beneficiary.

A QDT that is, for the year, a GRE is subject to the recovery tax in any of the following situations:

• The trust ceases, during the year, to have as beneficiaries individuals who were its electing beneficiaries during one or more previous taxation years. This can be caused, for example, by the death of the electing beneficiary or, where the trust had more than one electing beneficiary, by the death of the last electing beneficiary.
• The trust is no longer resident in Canada.
• The trust distributed an amount in the form of capital to a beneficiary who was not an electing beneficiary during the previous taxation year. However, certain payments made by the trust do not result in the recovery tax, such as payments made to a beneficiary as the debtor of the trust.

To calculate the recovery tax, complete form TP-768.1-V, Recovery Tax: Qualified Disability Trust, and enter the result from line 811 on line 150.1 of the trust income tax return. You must take the recovery tax into account when calculating instalment payments, if applicable.

Note that as of 2024, QDTs are eligible for the $175,000 basic exemption in the calculation of AMT. The exemption will be indexed as of 2025.

If the trust is designated as a QDT, you must check box 27 of the return and provide the requested documents and information.

Sections 768 to 768.2

3.7.18. Religious organization (other than a charity)

A congregation is a group of individuals who are part of a religious organization. A trust is deemed to have been created and to hold the property of a congregation if the following conditions are met:

• All the members of the congregation live and work together, do not have the right to own property in their own name, and devote their working lives to the activities of the congregation.
• The congregation carries on one or more businesses, or manages or controls businesses through a business agency (such as a corporation or a trust), for the purpose of supporting its members or the members of any other congregation.

The trust must calculate its income tax and comply with the requirements regarding the obligation to file an income tax return. Each year, however, the trust can elect, under federal legislation, to allocate all of its taxable income to its beneficiaries (the members of the congregation). For the purposes of Québec legislation, no such election may be made unless it is made under federal legislation, in which case it is automatically deemed to be made, provided the income tax, interest and penalties payable by the trust's beneficiaries for previous years are paid within the time limit required under the Taxation Act. Therefore, if the trust makes this election with the CRA, you must send us proof that the election was made and written notification no later than the filing deadline for the return or 30 days after the election was made (whichever is later).

If the trust earned business income in the year and a portion of the income is payable to a member of the congregation, the income is considered to be derived from a business operated by the member.

Sections 851.23 to 851.31

3.7.19. Self-benefit trust

A self-benefit trust has the same characteristics as an alter ego trust, except that the settlor may be less than 65 years of age. See Alter ego trust.

Sections 454.2(a) and (b)(ii)

3.7.20. Specified investment flow-through trust

For a given taxation year, a specified investment flow-through trust (SIFT) trust is a trust that is neither an excluded subsidiary entity nor a real estate investment trust (REIT) but that meets the following conditions at some time during the year:

• The trust is resident in Canada.
• Investments in the trust are listed or traded on a stock exchange or other public market.
• The trust holds one or more non-portfolio properties.

If a SIFT trust has an establishment in Québec, it must:

• calculate the non-deductible allocations amount (which is considered to be the amount of allocated non-portfolio earnings) and allocate the amount to its beneficiaries as an eligible dividend;
• pay income tax on the taxable distributions amount at the same tax rate as corporations. If the trust has an establishment in Québec and also has an establishment elsewhere, it must use the business allocation formula used by corporations to calculate the income tax.

The trust can use Schedule E to calculate:

• the deduction it can claim with respect to the portion of its income that is allocated to beneficiaries;
• the income tax payable on the taxable distributions amount; and
• the eligible dividends to be designated.

If the trust issued stapled securities, see Restrictions applicable to certain investment trusts with respect to stapled securities.

Sections 1129.70 and 1129.71

3.7.21. Specified trust

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 that did not earn income from other sources in Québec must complete lines 1 through 11 (making sure to check box 8b) and Part 7 of the return 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 return.

The trust has to file an income tax return and complete Schedule F every year, regardless of whether it is required to pay income tax.

If 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.

Sections 1129.77 to 1129.80

3.7.22. Spousal trust

For tax purposes, trusts for which the beneficiary is a spouse or de facto spouse are grouped into the following two categories:

• pre-1972 spousal trusts, that is:
  • testamentary trusts created before 1972, and
  • inter vivos trusts created before June 18, 1971;
• post-1971 spousal trusts, that is:
  • testamentary trusts created after 1971, and
  • inter vivos trusts created after June 17, 1971.

In the case of a pre-1972 spousal trust, the spouse may, during their lifetime, receive all of the trust's income. However, no other person may receive or otherwise obtain enjoyment of the trust's income or capital from the date on which the trust is created to the spouse's date of death or January 1, 1993, whichever is earlier.

In the case of a post-1971 spousal trust, the spouse has the exclusive right, during their lifetime, to all the trust's income. No other person, prior to the spouse's death, may receive or otherwise obtain enjoyment of the trust's income or capital. An inter vivos trust is considered to be a spousal trust if it possesses these characteristics throughout its existence.

If the settlor of a spousal trust transfers property to the trust, the settlor can take advantage of the rollover rule. When this rule is applied, there is no immediate tax incidence for the settlor with respect to the transfer. For more information, see Qualifying transfer.

However, such a transfer may be subject to the income attribution rule. In this case, the settlor rather than the trust or spouse must report the income (or loss) derived from the transferred property or the capital gain (or loss) derived from the disposition of the property. For more information, see Trust of which the beneficiary is the spouse or a minor and Revocable or blind trust.

Death of the beneficiary

Since 2016, the following rules have applied to spousal trusts for the taxation year in which the beneficiary dies:

• The trust's taxation year is deemed to end at the end of the day of death, and a new taxation year is deemed to begin at the start of the following day.
• The trust's income for the year is taxable in the trust's income tax return. However, the income can be taxable in the deceased beneficiary's income tax return if the following conditions are met:
  • The beneficiary was resident in Canada immediately before the death.
  • The trust was, immediately before the death, a testamentary trust that is a post-1971 spousal trust established by the will of a taxpayer who died before 2017.
  • The trust and the legal representative who is administering the GRE have made a joint election, using the prescribed form, to have the trust's income for the year be deemed payable to the beneficiary who died in that year. The election form must be enclosed with the individual's income tax return for the year of death and the income tax return of the trust for the given year.
• The deadline for paying the trust's income tax and filing its income tax return and RL-16 slips is the 90th day of the year following the calendar year during which the trust's taxation year ended.

The trust and the beneficiary are solidarily liable for the portion of income tax that the beneficiary must pay when the trust's income is included in the calculation of the beneficiary's income for their taxation year.

You must check box 28 of the income tax return if the trust is a spousal trust and the beneficiary of the trust died in the taxation year concerned. You must also enter the date of the beneficiary's death.

Note that a trust may cease to be considered a spousal trust where, during the lifetime of the spouse, another beneficiary receives or otherwise obtains enjoyment of all or part of the trust's income or capital, or where the benefits to the spouse are changed or cease to be granted.

Sections 440, 454, 652.1, 663.0.1 and 1034.0.0.4

3.7.23. Trust for a beneficiary under 21 years of age

A testamentary or inter vivos trust may keep, on behalf of a beneficiary, the portion of its income earned in the year that did not become payable to the beneficiary in the year because the beneficiary is under 21 years of age. The portion in question is nonetheless considered to have become payable (therefore allocated) to the beneficiary in the year if the following conditions are met:

• The trust was resident in Canada throughout the taxation year.
• The beneficiary was under 21 years of age at the end of the taxation year.
• The right to the trust's income:
  • was vested in the beneficiary no later than the end of the year (and no one exercised a discretionary power on that right); and
  • was not subject to any future condition, other than a condition respecting the beneficiary's survival to the age of 40.

The trust must therefore allocate to the beneficiary the portion of the income considered to have become payable during the year to the beneficiary concerned. The amount can be deducted on line 81 of the trust's return.

A person who transferred or loaned property to the trust may be subject to the income attribution rule. This means that this person, not the trust nor the beneficiary, may have to report the income (or loss) derived from the property or the capital gain (or loss) derived from the disposition of the property. For more information, see Trust of which the beneficiary is the spouse or a minor and Revocable or blind trust.

Section 664

3.7.24. Unit trust

A unit trust is an inter vivos trust in which, at any particular time, a beneficiary's interest is defined in terms of the units of the trust. The trust and its units must nevertheless meet the conditions set forth in section 649 of the Taxation Act.

Section 649

3.8. List of province, territory and country codes

If you are required to provide information about a province, territory or country on certain lines of the return and schedules, enter one of the codes from the lists below.

List of province and territory codes

List of country codes

All other countries: OMC

As the trustee, you must provide all the required information concerning the trust's income, deductions and credits in order to facilitate the calculation of its income tax payable. By paying its fair share of income tax, the trust contributes to tax fairness and to the financing of public services, in particular in the areas of education, healthcare and social services. The trust is liable to penalties and penal proceedings if it fails to provide the required information or files inaccurate or incomplete information.

4.1. Penalties

For example, a trust is liable to a penalty of:

• 5% of the income tax not paid by the filing deadline for form TP-646-V, Trust Income Tax Return, if it fails to file the form and an additional penalty of 1% of that income tax for each full month the form is late (up to a maximum of 12 months);
• 10% of the income it fails to report for a given taxation year if it fails to report the same type of income for one of the three previous years;
• $100 if it fails to provide required information in its return.

Sections 1045, TAA 59.0.2 and TAA 59.2.2

4.2. Voluntary disclosure

To avoid penalties, the trust can rectify its tax situation by filing a duly completed copy of form LM-15-V, Voluntary Disclosure. To be eligible for our voluntary disclosure program, the trust must make a disclosure that meets the terms and conditions set out in the current version of interpretation bulletin ADM. 4. The trust will nonetheless have to pay the income tax payable and any interest accrued. For more information about the program, see the current version of interpretation bulletin ADM. 4 on the Publications du Québecwebsite.

Under the Act respecting Access to documents held by public bodies and the Protection of personal information and the Tax Administration Act, you, as the trustee, have the right (subject to the exceptions provided for by these laws) to obtain all information regarding the trust, to consult any document that contains such information and to request that information be corrected.

4.3. Mandatory or preventive disclosure

4.3.1. Mandatory disclosure of certain transactions

Trusts may be required to make disclosures about various types of transactions, including:

• confidential transactions, transactions involving conditional remuneration and transactions involving contractual coverage;
• specified transactions;
• transactions determined by the Minister (disclosure to be made by advisors and promoters).

For more information see Mandatory Disclosure of Certain Transactions.

4.3.2. Preventive disclosure

A trust that is not required to make a mandatory disclosure can avoid the consequences (penalties, extended deadline for Revenu Québec to make an assessment) of the general anti-avoidance rule being applied to a tax planning scheme it or a partnership of which it is a member has undertaken by making a preventive disclosure.

For more information see Preventive Disclosure.

Section 1079.8.1 and the following

4.4. Mandatary disclosure of nominee contracts

Any trust that is party to a nominee contract entered into in the context of a transaction or a series of transactions having tax consequences is required to file form TP-1079.PN-V, Disclosure of a Nominee Contract. This requirement also applies to any trust that is a member of a partnership that is party to such a contract. The disclosure made by one of the parties to a nominee contract will be deemed to have also been made by all the parties to the contract.

Note that the disclosure must be made before the 90th day following the day the nominee contract was concluded.

If the disclosure is not filed by the deadline, the parties to the nominee contract will be solidarily liable for a $1,000 penalty. For every day after the deadline, an additional penalty of $100 will be imposed, up to a maximum of $5,000.

Sections 1079.8.6.4 and 1079.8.13.3

4.5. Obligation to register a trust operating a commercial enterprise

Any trust operating a commercial enterprise in Québec that is not administered by a registered trustee must register with the Registraire des entreprises and pay the applicable fees, pursuant to the Act respecting the legal publicity of enterprises. To register, such a trust must file form RE-204, Déclaration d'immatriculation pour une fiducie exploitant une entreprise à caractère commercial, available at Québec.ca.

For more information, refer to guide IN-525, Obligation d'immatriculation concernant les fiducies exploitant une entreprise à caractère commercial, which you can obtain by contacting the client services of the Registraire des entreprises. You can also refer to guide RE-204.G, Guide concernant la déclaration d'immatriculation pour une fiducie exploitant une entreprise à caractère commercial, which is available at Québec.ca.

Every year following the year in which it registered, the trust must pay the annual registration fee and file form RE-403, Déclaration de mise à jour annuelle ou courante pour une fiducie exploitant une entreprise à caractère commercial, with the Registraire des entreprises to declare that the information previously provided is still accurate or to make any necessary changes. Penalties apply for filing the declaration or paying the fees late. The declaration, payment of the fees and any penalties must be sent directly to the Registraire des entreprises. They cannot be enclosed with the trust income tax return. For more information, refer to guide RE-403.G, Guide concernant la déclaration de mise à jour annuelle ou courante pour une fiducie exploitant une entreprise à caractère commercial, available at Québec.ca.

The filing period for the declaration is given in the document Production de votre déclaration de mise à jour annuelle that the Registraire des entreprises sends out each year.

For more information, see File an Annual Updating Declaration in the Enterprise Register at Québec.ca.

4.6. Protection of confidential information

As a taxpayer, a trust provides us with confidential information that is vital to our mission. Our privacy policy explains how we collect, process and protect such information.

For more information, see Privacy Policy (Abridged).

4.7. Communication of confidential information to a person designated by the trust

If the trustee wants us to send information concerning the trust's tax file to a person the trustee has designated, the trustee must complete and sign form MR-69-V, Authorization to Communicate Information or Power of Attorney.

The authorization or power of attorney will remain valid indefinitely, unless the trustee enters the date on which the authorization or power of attorney ceases to be valid. To cancel an authorization or power of attorney previously granted, the trustee must use form MR-69.R-V, Revocation of Authorization to Communicate Information or of Power of Attorney.

Forms MR-69-V and MR-69.R-V can be mailed to us or submitted using the online service in My Account for professional representatives.

Section TAA 69

This section deals with certain transactions made in favour of the trust or by the trust. Such transactions can have significant consequences.

5.1. Rollover rule

5.1.1. Qualifying transfer

There is no tax incidence for a settlor who makes a qualifying transfer of property to a spousal trust, an alter ego trust, a self-benefit trust or a joint spousal trust (rollover rule). In this case, the proceeds of disposition for the settlor and the acquisition cost for the trust are deemed equal to the adjusted cost base (ACB) of the property or the undepreciated capital cost (UCC) attributable to the property if it is depreciable property.

For the transfer to be deemed a qualifying transfer, both the trust and the settlor must be resident in Canada at the time of the transfer. In the case of a testamentary spousal trust, the settlor must be resident in Canada immediately before death, and the trust must be resident in Canada immediately after the property in question is indefeasibly vested in it. In the case of a self-benefit trust, the transfer must not result in a change in the beneficial ownership of the property and, immediately after the transfer, no other person or partnership may have an absolute or contingent right as a beneficiary of the trust.

The settlor of the trust (or their legal representative in the case of a testamentary spousal trust) may elect not to apply the rollover rule, provided they notify the Canada Revenue Agency (CRA) of the election beforehand.

Note that the rollover rule applies to transfers of capital property only; it does not apply to transfers of property included in the inventory of a business.

Sections 440, 442, 454, 454.1 and the following, and 652.1

5.1.2. Qualifying disposition

There is little or no tax incidence (rollover rule) for an individual (referred to as the “transferor” below) who transfers property to a trust (referred to as the “assignee” below) as part of a qualifying disposition.

A disposition is a qualifying disposition if it does not change the beneficial ownership of the property and other conditions are met:

• The transferor receives no consideration, other than an interest as a beneficiary of the trust.
• The assignee is resident in Canada at the time of the transfer.
• The transferor and the assignee are trusts covered by one of points 1 through 11 under Exceptions to deemed sales.
• The transferor and the assignee are the same type of trust, if the transferor is a trust covered by one of points 1, 2, 3, 4 (except if the trust is established under an registered pension plan [RPP], a pooled registered pension plan [PRPP], a voluntary retirement savings plan [VRSP], a deferred profit-sharing plan [DPSP], an registered retirement savings plan [RRSP], a registered retirement income fund [RRIF] or an employee benefit plan), 5, 7, 9 or 11 under Exceptions to deemed sales.

If the transfer of property to a trust is considered to be a qualifying disposition, the acquisition cost of the property for the trust is deemed to be equal, as applicable, to the proceeds of disposition determined for the transferor (that is, the cost amount for the transferor immediately before the transfer) or, if the transferor elected to designate, under federal legislation, an amount as proceeds of disposition, the greater of the following amounts:

• the cost amount for the transferor immediately before the transfer; or
• the amount designated by the transferor in the election made with the CRA.

This election is automatically deemed to be made for the purposes of Québec legislation. Therefore, you must send us proof that the election was made with the CRA and written notification no later than the filing deadline for the return or 30 days after the election was made (whichever is later).

The rollover rule does not apply to dispositions of property in favour of a revocable or blind trust (see Revocable or blind trust).

Sections 692.5 and 692.9

5.2. Income attribution rule

5.2.1. Trust of which the beneficiary is the spouse or a minor

As a rule, if an individual (the transferor) transfers or loans property to a trust, it is the trust that must report the income or loss from the property or from property substituted for the property (both referred to as the “property concerned” below) and the capital gain or loss realized on the subsequent disposition of the property.

However, if the trust is an inter vivos trust in which the transferor's spouse (or a minor related to the transferor, including a niece or nephew) holds a right as a beneficiary, we consider that the transfer or loan of the property concerned is an inter vivos transaction between persons not dealing at arm's length. If the trust allocates to such a beneficiary the income from the property concerned or a capital gain resulting from the subsequent disposition of the property, it is the responsibility of the transferor (not the beneficiary) to report the amounts allocated (income attribution rule). You must check the box on line 17 of the return, enter the requested information on line 17a and complete Part 4 of Schedule C.

For their taxation year in which the trust's taxation year ends, the transferor must report:

• the lesser of the following amounts:
  • the income allocated by the trust to the beneficiary concerned, and
  • the result obtained by multiplying the trust's income from the property concerned by a fraction whose numerator is the income allocated by the trust to the beneficiary concerned and whose denominator is the total income allocated to those beneficiaries who throughout the year were the transferor's spouse or a minor related to the transferor (including a niece or nephew);
• where the beneficiary is the spouse, the lesser of the following amounts, if the trust disposed of the property during its taxation year:
  • the taxable capital gain allocated by the trust to the spouse, and
  • the net amount of the taxable capital gains and allowable capital losses resulting from the disposition of all the properties so transferred or loaned or property substituted for the property.

If the beneficiary is the transferor's spouse, only the income and capital gain for a period in which the transferor is the beneficiary's spouse and is resident in Canada can be attributed to the transferor.

If the beneficiary is a minor who is related to the transferor (including a niece or nephew), only the income for a period in which the transferor is resident in Canada can be attributed to the transferor.

Note that the income attribution rule does not apply:

• if the property is transferred for consideration at least equal to its fair market value (FMV), or if it is loaned at an interest rate at least equal to the prescribed rate;
• if certain types of income derived from the transferred property are allocated to a beneficiary who is a minor (see Exception for split income of a minor).

Sections 462.1, 462.5, 462.8 to 462.10, 462.15 and 462.21

5.2.2. Revocable or blind trust

A trust is said to be a revocable or blind trust if the transferred or loaned property (or the property substituted for that property) can revert to the transferor or be transferred to persons designated by the transferor after the creation of the trust, or if this property cannot be disposed of during the lifetime of the transferor without their consent.

If the trust is resident in Canada, it is the responsibility of the transferor, during the time the transferor is resident in Canada, to report any income or loss on the property and any capital gain or loss on its subsequent disposition (income attribution rule). You must check the box on line 18 of the return, enter the requested information on line 18a and complete Part 4 of Schedule C.

Note that the income attribution rule does not apply:

• to the transfer of a share of the capital stock of a private corporation where the share generates dividends or taxable benefits or where the disposition of such a share results in a capital gain that is deemed to be a taxable dividend, and the dividends, benefits or capital gain is paid or payable in the taxation year to a specified individual;
• if the trust:
  • is an employee trust,
  • is a trust established under an RPP, a PRPP, a VRSP, a profit-sharing plan (PSP), a DPSP, a registered education savings plan (RESP), a registered disability savings plan (RDSP), a registered supplementary unemployment benefit plan (RSUBP), an RRSP, a RRIF, an employee benefit plan, a tax-free savings account (TFSA) or a first home savings account (FHSA),
  • is an employee life and health trust,
  • is an insurance segregated fund trust,
  • is a retirement compensation arrangement trust,
  • is a trust all or substantially all of whose property is held for the purpose of providing benefits to individuals, for their current or former office or employment,
  • is an environmental trust,
  • is a private foundation that is a registered charity, or
  • received property (or substituted property) from an individual who received it for a child, provided the only beneficiaries of the trust are children for whom benefits were received by the individual (such as the child's parent) who transferred the property to the trust.

Sections 467 and 467.1

5.2.3. Exception for split income of a minor

Notwithstanding the income attribution rule explained under Trust of which the beneficiary is the spouse of a minor and Revocable or blind trust, if a trust allocates certain types of income (called split income) to a beneficiary who is a minor (minor beneficiary), it is the minor beneficiary, not the transferor, who must report the income. In this situation, the minor beneficiary must pay a special income tax on this income, calculated at the highest marginal rate on form TP-766.3.4-V, Income Tax on Split Income. In some cases, the father or mother is solidarily liable, with the minor beneficiary, for ensuring the payment of this income tax.

The split income must be entered on the minor beneficiary's RL-16 slip and certain codes must be entered in the blank boxes. See the Guide to Filing the RL-16 Slip: Trust Income (RL-16.G-V) for instructions for the following boxes:

• box A – Canadian and foreign capital gains
• box E – Foreign business income
• box F – Foreign investment income
• box G – Canadian business or property income
• box I – Taxable amount of eligible dividends and ordinary dividends

Split income cannot be designated under subsections 104(13.1) and 104(13.2) of the federal Income Tax Act, and must be reported by the minor beneficiary in their income tax return. The amount can subsequently be deducted on line 295 of the minor beneficiary's return, provided the special tax on split income is being paid (line 443).

However, a minor beneficiary does not have to report the split income for the taxation year in which the split income is earned by the trust and the income attribution rule applies to the transferor (see Trust of which the beneficiary is the spouse of a minor and Revocable or blind trust) if:

• the minor was not resident in Canada throughout the taxation year;
• the minor's father and mother were not resident in Canada at any time during the taxation year; or
• the income was allocated to the minor because of the death of:
  • their father or mother, or
  • another person, if, for the taxation year, the minor was a full-time student at a post-secondary educational institution, or a tax credit for severe and prolonged impairment in mental or physical functions could be claimed with regard to the minor.

Section 462.24.1

5.2.4. Exception for split income of an adult beneficiary

Since 2018, measures have been in place that broaden the rules regarding the taxation of split income so that they apply to adults resident in Canada who receive split income. Consequently, such adults must pay income tax, calculated using form TP-766.3.4-V, on the portion of their income that is split income.

These rules do not apply to persons engaged in the activities of a business. Such persons can receive income from the business without being subject to the tax on split income.

The amount of split income must be entered on the beneficiary's RL-16 slip. Enter a code describing the split income in a blank box. See the instructions regarding the amounts received by beneficiaries in the Guide to Filing the RL-16 Slip: Trust Income (RL-16.G-V).

Solidary liability for the tax on split income

The age of a specified individual determines who is solidarily liable for the payment of the tax on split income. If the specified individual did not reach age 17 before the taxation year concerned, the individual and the individual's parents are solidarily liable for the payment of the tax. If the specified individual reached age 17 before the taxation year concerned, the tax on the income from a related business is the solidary liability of the individual and of each source individual who is sufficiently related to the related business. The relationship required between the source individual and the related business is described in the definition of related business.

The liability of the parents and of each individual who is related to the specified individual is limited to the amounts included in the specified individual's split income. However, the liability of the specified individual, the individual's parents and of each individual who is related to the specified individual is not limited with respect to interest payable as a result of the application of the measures applicable to the tax on split income.

5.3. Losses on the disposition of property involving an affiliated person

A loss sustained by the trust on the disposition of property involving an affiliated person is not deductible. However, the loss may give rise to a carry-over mechanism, with rules that vary according to whether the property concerned is depreciable property or non-depreciable property (see Non-depreciable property and Depreciable property).

Such a loss is deductible in certain circumstances, such as when:

• the trust is deemed to have disposed of:
  • property further to the immigration or emigration of the person, or further to a change in use of the property,
  • a stock option that has expired,
  • a debt that has become a bad debt,
  • a share issued by a corporation that has gone bankrupt or that was insolvent at the time it was wound up;
• the trust becomes exempt or ceases to be exempt from Québec income tax within 30 days following the disposition of the property.

In this section, an “affiliated person” is a person that is affiliated with the trust, that is:

• a majority-interest beneficiary of the trust;
• another trust, if a contributor to the other trust is affiliated with a contributor to the trust and:
  • a majority-interest beneficiary of one trust is affiliated with a majority-interest beneficiary of the other trust,
  • a majority-interest beneficiary of one trust is affiliated with each member of a majority-interest group of beneficiaries of the other trust, or
  • each member of a majority-interest group of beneficiaries of one trust is affiliated with at least one member of a majority-interest group of beneficiaries of the other trust;
• a corporation controlled directly or indirectly, in any manner whatever, by the trust or by an affiliated group of persons of which the trust is a member;
• a partnership of which the trust is a majority-interest partner.

In a broader context, a person is considered to be affiliated with:

• their spouse;
• a corporation controlled directly or indirectly, in any manner whatever, by the person, the person's spouse, an affiliated group of persons of which the person or the person's spouse (if applicable) is a member;
• a partnership of which the person is a majority-interest partner;
• a trust of which the person is a majority-interest beneficiary.

For the application of the rules for affiliated persons, a partnership is considered to be a person.

An affiliated group of persons is a group of which each member is affiliated with every other member.

Section 21.0.3

A beneficiary of the trust is a majority-interest beneficiary at a particular time if one of the following conditions is met:

• the FMV of all the interests in the income of the trust held by the beneficiary and by all persons with whom the beneficiary is affiliated is greater than 50% of the FMV of all the interests in the income of the trust; or
• the FMV of all the interests in the capital of the trust held by the beneficiary and by all persons with whom the beneficiary is affiliated is greater than 50% of the FMV of all the interests in the capital of the trust.

Section 21.0.1

A person is a contributor to the trust if the person has made a loan or transfer of property to the trust, either directly or indirectly, in any manner whatever, unless the following conditions are met:

• the person deals at arm's length with the trust at the time of the loan or the transfer;
• the person has not become a majority-interest beneficiary of the trust immediately after the loan or transfer; or
• the person makes the loan at a reasonable interest rate or makes the transfer for a consideration equal to the FMV of the property.

The trust is considered, at a particular time, to be a majority-interest partner of a partnership in the following circumstances:

• the trust's share of the partnership's income for the fiscal period ended before that time (or for the first fiscal period including that time, in the case of a new partnership) would have exceeded 50% of the partnership's income from all sources if the trust had held the same interest throughout the fiscal period as the interest that the trust or an affiliated person held in the partnership at that time;
• the trust would have received, together with all affiliated persons, more than 50% of the amount that the partnership would have paid to all partners otherwise than as a sharing of income if the partnership had been wound up at that time.

Identical property is property that is identical in every respect to another property (for example, the properties belong to the same type or class of property or they confer the same rights on their holder). The term “identical property” is also used to designate the right to acquire the other property. Moreover, a share that is acquired in exchange for another share under certain rollover rules is deemed to be property that is identical to the other share.

Shares of the capital stock of a specified investment flow-through (SIFT) wind-up corporation in respect of a SIFT wind-up entity that were acquired before 2013 are deemed to be property that is identical to interests in an entity that are an investment in the SIFT wind-up entity.

Sections 1, 21.0.1, 21.0.3, 237 and 238.2

5.3.1. Non-depreciable property

The trust cannot deduct a capital loss sustained on the disposition of non-depreciable property (referred to as the “original property” below) if:

• in the 30 days that precede and the 30 days that follow the disposition, the trust or an affiliated person acquires substituted property that is, or is identical to, the original property; and
• at the end of the period, the trust or an affiliated person still owns the substituted property or has the right to acquire it.

However, the loss may be deducted later as a loss deemed to have been sustained immediately before the time at which the earliest of the following events occurs:

• The substituted property is disposed of in favour of a non-affiliated person. However, during the 30-day period following the disposition, neither the trust nor an affiliated person may own:
  • the substituted property; or
  • property that is identical to the substituted property and that was acquired during the 30 days that preceded the disposition.
• The substituted property is deemed to have been disposed of. This is the case if:
  • the trust ceases to be resident in Canada at the time it owns the substituted property;
  • the property is a debt that has become a bad debt, or a share issued by a corporation that has gone bankrupt or that was insolvent at the time it was wound up.
• The trust becomes subject to a loss restriction event.

The trust cannot deduct a capital loss sustained on the redemption of shares other than distress shares if the corporation that issued the shares is affiliated with the trust immediately after the transaction. However, if the trust holds a share of the capital stock of the corporation at that time (that is, immediately after the transaction), the amount of the loss may be used to reduce the capital gain that could be realized or to increase the capital loss that could be sustained by the trust on a subsequent disposition of the share. The ACB of each share of the corporation that is held by the trust at that time is increased by an amount obtained by multiplying the amount of the loss by the ratio, at that time, of the FMV of the share to the FMV of all the shares of the corporation held by the trust.

Sections 237 and 238 to 238.3

5.3.2. Depreciable property

The trust cannot deduct a terminal loss upon the disposition of depreciable property (referred to as the “property concerned” below) if the following conditions are met:

• The following calculation results in an excess amount: subtract the proceeds of disposition of the property concerned (or its FMV at the time of the disposition, if the disposition is made for no consideration or for a consideration that is less than the FMV) from the lesser of amounts A and B, where:
  • A is the capital cost of the property,
  • B is the result of the following calculation: C × D ÷ E, where
    • C is the undepreciated capital cost (UCC) of all property in the same class immediately before the time of the disposition,
    • D is the FMV of the property at that time, and
    • E is the FMV of all property in the class immediately before that time.
• On the 30th day after the disposition, the trust or an affiliated person owns the same property or has the right to acquire the property (other than, for example, a right, as security only, derived from a hypothec).

The consequences of the disposition are as follows:

• The proceeds of disposition of the property concerned are deemed to be equal to the lesser of amounts A and B. Thus, if the property concerned is the last in the class, a terminal loss cannot be claimed.
• The previously mentioned excess amount (the amount by which the lesser of amounts A and B exceeds the proceeds of disposition of the property or its FMV, as applicable) is deemed to be the capital cost of hypothetical property that is deemed owned by the trust before the beginning of the taxation year in which this disposition occurs and that is in the same class as the property concerned. Thus, the trust can claim capital cost allowance for the hypothetical property, without applying the half-year rule (50% reduction of the amount of capital cost allowance). The trust is entitled to such a deduction until the time that immediately precedes the earliest of the following events:
  • the trust or an affiliated person no longer owns or has a right to acquire the property concerned for a period of at least the following 30 days (unless the right is a guarantee, such as a mortgage);
  • the trust or an affiliated person ceases to use the property concerned for the purpose of earning income;
  • the trust ceases to be resident in Canada while owning the property concerned (the trust is deemed to have disposed of the property);
  • the trust is subject to a loss restriction event.

If, during the event in question, the trust has no other property in the class, the UCC of that class entitles the trust to a deduction for a terminal loss.

Section 93.3.1

5.4. Restrictions applicable to certain investment trusts with respect to stapled securities

In calculating its income, a given entity that is a specified investment flow-through (SIFT) trust or a real estate investment trust (REIT) cannot claim a deduction for an amount paid or payable, as the case may be:

• as interest on a debt or obligation that is a stapled security, unless each reference security of the stapled security is also a debt or an obligation;
• to a REIT or a subsidiary of a REIT (or to a person or partnership that pays an amount, or has an amount paid, to such a REIT or subsidiary of a REIT), if a security of the entity or of one of the subsidiaries of the entity, or of an entity of which the entity is a subsidiary, is a reference security of a stapled security issued by the REIT or a subsidiary of the REIT.

Note that if a security of the trust ceased to be a stapled security and then became stapled once again, and the trust claimed the above-mentioned deduction in the period during which the security was no longer a stapled security (referred to as the “period of unstapling”), the trust must include in its income the amount of the deduction.

Sections 92.31, 92.32 and 158.16 to 158.18

5.5. Trusts subject to a loss restriction event

A tax rule called the “attribute trading restriction” prevents persons dealing at arm's length from trading a corporation's tax attributes by acquiring control of the corporation to take advantage of its unused attributes.

Trusts are subject to a similar rule, with the necessary adaptations (for example, it is a matter of holding a majority interest in the trust instead of acquiring control of the corporation).

At any time after March 20, 2013 (referred to as the “given time” below), if a person becomes a majority-interest beneficiary of a trust or a group of persons becomes a majority-interest group of beneficiaries of a trust, the trust is subject, at that time, to a loss restriction event. The trust can therefore no longer take advantage of certain tax attributes. As a rule, if a tax attribute is a loss (such as a net capital loss, non-capital loss and farm loss), the following restrictions apply:

• If the loss is sustained in a taxation year that ended before the given time, it cannot be carried forward to a taxation year ending after the given time.
• If the loss is sustained in a taxation year that ends after the given time, it cannot be carried back to a taxation year that ended before the given time.

The use of the term “majority-interest beneficiary” in this context is similar, with some differences, to the use of the term in the context of a loss sustained on the disposition of property involving an affiliated person (see Losses on the disposition of property involving an affiliated person).

If the trust became subject to a loss restriction event during the year, check box 29 and enter the date on which the trust became subject to a loss restriction event.

Section 21.0.6

5.5.1. Exceptions

In the application of this tax rule, a person is not deemed to become a majority-interest beneficiary of a trust or a group of persons is not deemed to become a majority-interest group of beneficiaries of a trust based solely on the occurrence of one of the following events:

• The trust's equity is acquired by:
  • a person affiliated with the trust immediately before the acquisition;
  • a person from another person with which the person was affiliated immediately before the acquisition;
  • a succession from a person following the person's death; or
  • a person from the succession of an individual who was affiliated with the person immediately before the individual's death.
• The terms of the trust are amended or certain transactions are made in accordance with the terms of the trust or in accordance with a decision of a trustee, if each majority-interest beneficiary of the trust or each member of a majority-interest group of beneficiaries of the trust immediately after such an event was affiliated with the trust immediately before that time.
• All of the trust's equity is transferred to a corporation, a partnership or another trust (referred to as the “acquirer” below), if the only consideration for the transfer is equity (other than a debt) of the acquirer and the acquirer is a new entity (an entity that never held, before the transfer, property other than property having nominal value) that will not afterwards become a subsidiary of another entity.
• At a given time, some of the trust's equity is transferred to a corporation, a partnership or another trust, provided all of the following conditions are met:
  • immediately before the given time, a person is a majority-interest beneficiary of the trust or a group of persons is a majority-interest group of beneficiaries of the trust (referred to as the “person or group of persons concerned” below);
  • immediately after the given time, the person or group of persons concerned, as the case may be, and no other person or group of persons, is:
    • if the acquirer is a corporation, a person by whom, or a group of persons by which, the corporation is controlled directly or indirectly, in any manner whatever,
    • if the acquirer is a partnership, a majority-interest partner, or a majority-interest group of partners, of the partnership,
    • if the acquirer is a trust, a majority-interest beneficiary, or a majority-interest group of beneficiaries, of the trust;
  • at no time during a series of transactions or events that includes the transfer did the person or group of persons concerned, as the case may be, cease to be a person or group of persons described in any of the three above paragraphs in respect of the acquirer.
• The acquisition or the disposition of equity by a trust that is an investment fund takes place immediately before the acquisition or disposition, and the acquisition or disposition is not part of a series of transactions or events that includes the trust ceasing to be an investment fund.

Section 21.0.7

5.5.2. Deemed end of taxation year

If a trust is subject to a loss restriction event in a taxation year, the trust's taxation year is deemed to end immediately before the moment that a person or a group of persons becomes a majority-interest beneficiary or a majority-interest group of beneficiaries of the trust. However, the trust's taxation year is not deemed to end immediately before that moment for the purposes of determining the deadline for filing the Trust Income Tax Return (TP-646-V) and RL-16 slips, for the payment of a balance of income tax and for making the election to be considered a mutual fund trust under federal legislation.

For the purposes of a loss restriction event:

• A partnership is considered to be a person.
• The definition of the term equity is the same as the one in the Definitions, except it does not include a right to the equity.
• The restrictions applicable to the carryover of a loss do not apply to non-capital losses and farm losses if the trust sustains the losses in the operation of a for-profit business or a business carried on with a reasonable expectation of profit:
  • throughout the year to which the loss is carried forward (loss sustained before the given time);
  • throughout the year in which the loss was sustained and in the year to which the loss is carried back (loss sustained after the given time).
• The term “business” used in the previous point includes an adventure or a concern in the nature of trade.

Sections 21.0.1, 21.0.5 and 21.0.6

5.6. Thin capitalization rules

Rules called “thin capitalization rules” limit the ability of trusts to deduct the interest they paid on debts owing to specified non-resident beneficiaries. The following trusts are subject to the rules if they earned business or property income in a taxation year and they are required to file an income tax return:

• a trust resident in Canada;
• a trust having activities in Canada, but that is not resident there;
• one of the above-mentioned trusts that is a member of a partnership.

Such trusts cannot deduct the interest they paid on the portion of the debts owing to specified non-resident beneficiaries that exceed the authorized 1.5-to-1 debt-to-equity ratio.

If a portion of the debts owing to specified non-residents is allocated to the trust by a partnership and the interest paid by the partnership on this portion of debts owing is deductible in the calculation of the partnership's business or property income, the trust must add to its share of such an income an amount equal to the portion of the interest that exceeds its authorized debt-to-equity ratio.

More specifically, to determine the amount of interest that the trust cannot deduct (for the debts it contracted) or the amount that it must add to its share of a partnership's business or property income (for the debts contracted by the partnership), the trust must use the excess debt ratio, calculated as follows:

• A × 1.5 = B, where
  • A is the equity, and
  • B is the amount of authorized debt;
• C – B = D, where
  • C is the debts owing to specified non-resident beneficiaries, and
  • D is excess debts;
• D ÷ C = E, where
  • E is the excess debt ratio.

See the definitions of specified beneficiary and equity amount.

Sections 169 to 172

5.7. Non-deductible losses in the calculation of the adjusted taxable income for alternative minimum tax purposes

In calculating the adjusted taxable income for alternative minimum tax purposes, an individual (including a trust) who holds an interest in a partnership as a limited partner or as a specified member (since becoming a member of a partnership), or whose interest in a partnership is a tax shelter, can deduct a limited amount of the partnership's capital losses, business losses or property losses.

However, since the 2012 taxation year, such losses have been deductible in the calculation of the individual's adjusted taxable income, except where the individual's interest in the partnership is a tax shelter. The relief measure also applies to the 2003 through 2011 taxation years if the individual filed proof of the election with the Minister of Revenue before January 24, 2016.

5.8. Use of a trust for cross-border surplus stripping

The paid-up capital of the shares of a Canadian corporation generally represents the amount of capital that has been contributed to the corporation by its shareholders. The paid-up capital is a tax attribute because it can be returned to the shareholders free of tax. It is also included in the determination of a corporation's equity under the thin capitalization rules, which can increase the amount of its deductible interest expenses (see Thin capitalization rules). The amounts distributed to the shareholders that exceed the paid-up capital are usually treated as taxable dividends. These dividends are subject to income tax if they are received by non-resident shareholders.

Certain non-resident individuals may obtain tax benefits through a transfer of the shares of one corporation resident in Canada to another such corporation (the “Canadian purchaser corporation”) with which they are not dealing at arm's length, in exchange for shares of the Canadian purchaser corporation or other forms of consideration.

The cross-border anti-surplus-stripping rule is intended to prevent non-residents from using deemed dividends or a reduction of paid-up capital to extract free of tax a corporation's surplus in excess of the paid-up capital of its shares, or to artificially increase the paid-up capital of such shares.

Since February 27, 2018, this rule has applied to transactions involving a trust. The trust has to allocate its assets, liabilities and transactions to its beneficiaries based on the relative fair market value (FMV) of the beneficiaries' interests in the trust. Thus, the proceeds of a trust's disposition of shares of a corporation resident in Canada must be allocated to the trust's beneficiaries based on the FMV of their interest.

6.1. Information about the trust

Lines 1a to 1b 

Effective March 26, 2021, a trust must get an identification number before filing its first income tax return with us. Failure to enter this number on the return may result in penalties.

To get the number, the trust can:

• use the online service in My Account for individuals, My Account for businesses or My Account for professional representatives; or
• file form LM-58.1.2-V, Application for a Trust Identification Number.

If the trust is not filing its first return, you must enter the 10-digit identification number shown on a previous notice of assessment.

On line 1a1, enter the trust's account number, which is shown on the federal Trust Income Tax and Information Return (form T3RET).

Enter the trust's name as it appears (or will appear) on all income tax returns and correspondence.

Lines 2a to 3g 

Enter the name and identification number of the trustee or the liquidator of the succession (or the last and first names, date of birth, and social insurance number, in the case of an individual), as well as the mailing address and telephone number.

If there is more than one trustee or liquidator, you must designate a primary representative.

Line 4

In the case of a deemed resident trust, enter the code for the actual country of residence (see List of province, territory and country codes).

Lines 5a and 5b 

Enter the start and end date of the taxation year covered by the return.

Lines 6 and 6a 

If the trust is an inter vivos trust, check box 6 and enter the date on which the trust was created on line 6a.

Lines 7 to 7c 

If the trust is a testamentary trust, check box 7 and enter the date of death on line 7a and the social insurance number of the person whose death determined the existence of the trust on line 7b.

If the testamentary trust is a succession, also check box 7c. Furthermore, if the trust is a graduated rate estate (GRE), you must check box 26.

If the trust is a qualified disability trust (QDT), you must check box 27 and enter the social insurance number of the beneficiaries who qualify for the disability tax credit.

Lines 8 to 8b 

On line 8, enter the appropriate code for the trust from the table below. For more information, see Types of trusts.

Lines 9 to 32 

Check the appropriate boxes and, where applicable, enter the requested information.

Provide complete and accurate information. Attach any requested documents.

On line 11, enter the wind-up date if the return being completed is a final return. This date must match the date shown on line 5b. For more information, see Certificate authorizing the distribution of property.

On lines 12a and 12b, enter the total assets and the total liabilities as shown in the trust's registers. The amounts to be entered must correspond, respectively:

• to the total of the cost amounts of all the assets (liquid assets, investments, immovables, automobiles, boats, property, etc.); and
• to the value of all loans and debts (lines of credit, mortgages and any other kind of loan) at the end of the trust's taxation year.

On line 13, enter the code corresponding to the country in which the trust was resident if the trust was not resident in Canada during the taxation year. If the trust became or ceased to be resident in Canada during the taxation year, enter the date of this change on line 13.1. See List of province, territory and country codes.

Concerning line 14, the distribution of the property of the succession is not considered to be a change in interests.

If you checked box 17 and the year of the transfer or loan entered on line 17a is the taxation year covered, enclose a note providing a description of the property, the name and address of the transferor, and the relationship between the transferor and the trust's beneficiary or beneficiaries. If income from the property is being allocated to a minor, also provide the type of income and the amount.

If you checked box 18 and the year of the transfer or loan entered on line 18a is the taxation year covered, enclose a note providing a description of the property and the name and address of the transferor. If income from the property is being allocated to a minor, also provide the type of the income and the amount.

6.2. Net income and taxable income

As a rule, all amounts from foreign sources must be converted into Canadian dollars. For exchange rate information, consult the Bank of Canada website.

Section 21.4.17

Lines 50, 51 and 52 – Investment income

If the trust earned investment income, complete Schedule B and carry the income to lines 50, 51 and 52 in the return (for instructions see Schedule B – Investment Income, Gross-Up of Dividends Not Designated and Adjustment of Investment Expenses).

Actual amount of dividends from taxable Canadian corporations

On line 50, enter the actual amount of all eligible dividends and all ordinary dividends that the trust received or is deemed to have received from taxable Canadian corporations (for example, the dividends entered in boxes A1 and A2 of the RL-3 slip).

Section 497

Other investment income from Canadian sources

On line 51, enter the total interest and other investment income from Canadian sources (such as the amounts entered in boxes D, E and H of the RL-3 slip). In the case of a succession, the interest accrued to the date of death must be reported in the deceased person's income tax return, rather than in the return filed by the succession.

Foreign investment income

On line 52, enter, in Canadian dollars, the total gross foreign investment income, that is, the amount of net income received, plus foreign income tax withheld at source. Use the exchange rate in effect at the time the income was received by or credited to the trust, or the average annual exchange rate if the income was received over the entire taxation year. For exchange rate information, consult the Bank of Canada website.

Enclose all information slips on which such income is shown with the return.

Ligne 53 – Taxable capital gains

Complete Schedule A if the trust disposed of property during the taxation year or if it must report a reserve with respect to a capital gain realized in a previous taxation year. 

Enter the gains (or losses) on the appropriate lines of Schedule A (or Schedule A.1 if the trust was not a personal trust). 

If the trust owned, acquired, disposed of or used one or more cryptoassets in 2024, it must also complete a Cryptoasset Return (form TP-21.4.39-V). Capital gains from crypotassets must be reported on line 217 of Schedule A if realized before June 24, 2024, and on line 1217 if realized after June 24, 2024 (if the trust has incurred a loss, enter the amount of the loss preceded by a minus sign [–]).

Note that the trust is subject to penalties if it has disposed of cryptoassets during the year and fails to file form TP-21.4.39-V.

On line 53 of the return, enter the taxable capital gains realized by the trust during the taxation year (amount from line 230 of Schedule A, if positive). To determine the amount of the capital gains that may be designated in favour of beneficiaries, complete Part 3 of Schedule A or Part 2 of Schedule A.1. See How to complete Schedule A for instructions.

Sections 28(b) and 467

Tax exemption for capital gains realized on the donation of certain property

Capital gains realized on the donation of the following property are generally tax-exempt:

• securities, such as a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a mutual fund unit, an interest in an insurance segregated fund trust, a bond, debenture, note, debt obligation or similar obligation issued or guaranteed by the Government of Canada or issued by a provincial government or by a mandatary of a provincial government, if the trust made the donation to a charity or other qualified donee (starting in 2024, trusts subject to alternative minimum tax [AMT] must include 30% of the capital gains realized on the donation of publicly traded shares in their taxable income for AMT purposes);
• ecological property given to certain qualified donees (for more information on the applicable rules, see the instructions for lines 123 and 210);
• a musical instrument donated to a recognized educational institution in Québec (for more information on the applicable rules, see the instructions for line 123);
• cultural property given to certain qualified donees (for more information on the applicable rules, see the instructions for line 123).

The tax exemption also applies to gifts made (or deemed to have been made) to a qualified donee by a graduated rate estate (GRE) at the time the donated property (or property substituted for such property) is transferred or by a succession that has ceased to be a GRE solely because the 36-month period following the death has expired. In the latter case, the transfer to the donee must take place within 60 months of the death.

Where the above-mentioned securities are acquired after March 21, 2011, and are included in a flow-through share class of property, a portion of the capital gain realized on the donation may be exempt from income tax if the total capital gains realized by the trust on the disposition (donation or any other form of disposition) of the property of that class exceeds the original cost of all the property (the deemed zero cost of flow-through shares does not apply). For more information, see guide IN-120-V, Capital Gains and Losses.

A capital loss sustained on such a donation must be reported in Schedule A.

If a benefit is obtained as consideration for the donation of ecological property or of the above-mentioned securities, see the instructions for line 204, line 205 and line 206 of Schedule A.

Sections 232 and 710.0.1

Capital gains tax exemption for exchangeable securities

The trust may realize a capital gain on the exchange of unlisted securities for publicly traded securities that it subsequently donates to a qualified donee.

This capital gain is tax exempt if the following conditions are met:

• at the time the unlisted securities were issued, a condition provided that the holder could exchange them for publicly traded securities;
• the publicly traded securities are the only consideration received in the exchange; and
• they are donated within 30 days of the exchange.

For the purposes of such a measure, unlisted securities are shares or partnership interests. However, in the case of partnership interests, special rules provide that only capital gains that reflect economic appreciation of the interests are tax exempt. The portion of capital gains attributable to a reduction of the adjusted cost base (ACB) is not tax exempt. The taxable portion of the gains corresponds to the lesser of the following amounts:

• the capital gain otherwise determined; and
• the amount by which, for the trust, the cost of the exchanged interests exceeds the ACB of the interests (distributions of capital received by the trust for the interests must not be taken into account to determine the ACB).

A capital loss sustained in such situations is reported as is in Schedule A.

The tax exemption also applies to gifts made (or deemed to have been made) to a qualified donee by a GRE at the time the donated property (or property substituted for such property) is transferred or by a succession that has ceased to be a GRE solely because the 36-month period following the death has expired. In the latter case, the transfer to the donee must take place within 60 months of the death.

Capital gains deduction

Where applicable, a personal trust that was resident in Canada throughout the taxation year and that designates as a taxable capital gain an amount allocated to a beneficiary resident in Canada must also designate the portion of the capital gain that was realized on qualified farm or fishing property or qualified small business corporation shares (QSBCSs). By designating a gain on QSBCSs, the beneficiary can claim a deduction for taxable capital gains. This designation may also apply to farm or fishing income derived from the disposition of incorporeal capital property that is allocated to the beneficiary.

When calculating the deduction for 2024, you have to take into account the period before June 25, 2024, and the period after June 24, 2024.

For more information, see Schedule C – Summary of Allocations and Designations.

Section 668.1

Losses on dispositions involving an affiliated person

If the trust sustained a loss on a disposition of property involving an affiliated person, see Losses on the disposition of property involving an affiliated person.

Line 54 – Pension benefits

In the case of a testamentary trust, enter the total pension benefits received, such as:

• life annuity payments under a pension plan, income-averaging annuities and ordinary annuities;
• a single payment from a pension plan, a foreign retirement arrangement or a deferred profit-sharing plan (DPSP).

The portion of a single payment that is accrued to December 31, 1971, and not allocated to the beneficiaries may be taxed at a reduced rate if the trust so elects. If the trust makes this election, do not enter the amount on line 54; contact us to find out the amount of the tax adjustment to be entered on line 121 of the return.

Death benefits paid under the Québec Pension Plan (QPP) or the Canada Pension Plan (CPP) must be reported on line 61.

Sections 312(c) and 317

Lines 55a and 55 – Business income (or loss)

Enter the gross income and the net income (or net loss) resulting from the operation of a business other than a farming or fishing business. The accrual method of accounting must be used to calculate the income. Enclose with the return the income statement and balance sheet of each business.

Note that you must include business and property income earned in 2024 on cryptoasset activities. To calculate such income, complete a Cryptoasset Return (TP-21.4.39-V). If the trust suffered a loss, enter the amount of the loss, preceded by a minus sign (–). Carry the results from lines 111 and 112 of form TP-21.4.39-V to lines 55a and 55, respectively of the return.

If the trust received amounts under a disaster relief program, see guide IN-125-V, The Tax Effects of Financial Assistance Received as a Result of a Disaster.

Fiscal period

Income that the trust derives from a business whose fiscal period does not end on December 31 must be adjusted for the calendar year in which the income was earned, rather than on the basis of the business's fiscal period.

This rule does not apply to a business carried on by a trust that is a GRE or by a partnership such a trust is a member of. The end date of the fiscal period of a business operated by a trust must be the same as the one covered by the federal return (T3).

The election made under federal legislation to have the fiscal period of a business carried on by the trust not correspond to the calendar year is automatically deemed to be made for the purposes of Québec legislation. Therefore, you must send us proof (a copy of federal form T1139, Reconciliation of Business Income for Tax Purposes) that such an election was made with the Canada Revenue Agency (CRA) and written notification no later than the filing deadline for the return or 30 days after the election was made (whichever is later). You must also enclose a duly completed copy of form TP-80.1-V, Calculation of Business or Professional Income, Adjusted to December 31, with these documents.

For more information, see guide IN-155-V, Business and Professional Income, or contact us.

Sections 7, 7.0.3 and 217.2

Labour costs

You must provide the names of any persons (other than employees of the trust) to whom the trust paid labour costs related to renovations, improvements, maintenance or repairs to an immovable (including land) that is located in Québec and is used for rental purposes or in order to carry on a business. To meet this requirement, complete form TP-1086.R.23.12-V, Costs Incurred for Work on an Immovable, and enclose it with the return. The trust is liable to a penalty if the information is not provided.

The trust must also complete the form if it was a member of a partnership that paid labour costs to persons other than the partnership's own employees, unless another member of the partnership was designated to file the form.

Section 1086R88

Flipping residential property

Since January 1, 2023, if a trust disposes of a residential property (including rental property or a purchase option) that it held for fewer than 365 consecutive days, we may consider that the trust flipped a property. The profit from flipping the property will be fully taxable as business income. For more information, see Flipping Your Property (Home or Residential Complex).

Certified forest producer

As of March 18, 2016, a trust that is a certified forest producer (or a trust that is a member of a partnership that is a certified forest producer) under the Sustainable Forest Development Act in respect of a private forest can ask to average a portion of its income derived from non-retail sales of timber produced in a private forest to purchasers who have an establishment in Québec.

To be eligible for this deduction, the trust must be resident in Québec at the end of the taxation year. Income averaging consists of deducting a portion of the income derived from the non-retail sale of timber produced in a private forest from the trust's taxable income and gradually including the deducted portion in its taxable income over a period not exceeding 7 or 10 years, depending on the date of the sale.

For a taxation year that includes March 10, 2020, and for any subsequent taxation year, you must determine the portion of the amount applicable to sales made before this date to calculate the maximum averaging period.

For example, if a sale of timber subject to the income-averaging mechanism was concluded before March 10, 2020, all or part of the amount deducted respecting the sale for a year must be included in the calculation of the trust's taxable income for one or more of the seven following years, regardless of the taxation year in which the income from that sale was earned. For each of the six taxation years following the year for which the deduction was claimed, the trust must include in the calculation of its taxable income at least 10% of the amount deducted, up to the amount by which the amount deducted exceeds the aggregate of the amounts already included. In the seventh year following the year for which the deduction was claimed, the trust must include the portion of the amount that has yet to be included in this calculation.

However, if a sale of timber subject to the income-averaging mechanism was concluded after March 9, 2020, all or part of the amount deducted respecting the sale for a year must be included in the calculation of the trust's taxable income for one or more of the ten following years. For each of the ten taxation years following the year for which the deduction was claimed, the trust must include in the calculation of its taxable income at least 10% of the amount deducted, up to the amount by which the amount deducted exceeds the aggregate of the amounts already included.

Regardless of the date on which the sales were concluded, the trust must include in the calculation of its income any amount deducted that was not included in the year where:

• the trust disposes of the private forest;
• the trust ceases to be a member of the partnership; or
• the fiscal period in which the partnership disposes of the private forest ends.

Complete form TP-726.30-V, Income Averaging for Forest Producers, to determine the amount to be deducted on line 94, and the amount to be included on line 98.1, of the return and enclose it with the return. If this is the first year in which you are asking to average income, enclose a copy of the certified forest producer certificate issued under the Sustainable Forest Development Act with respect to the private forest for which the deduction is being claimed.

Sections 726.42 to 726.44

Cryptoassets

Use of cryptoassets in the operation of a business can have tax consequences for a trust if, for example:

• The trust owned cryptoassets at the start of the taxation year but did not use them during the year and did not buy or receive other cryptoassets.
• The trust did not own cryptoassets at the start of the taxation year but bought or received such assets during the year and used them.
• The trust did not own cryptoassets at the start of the taxation year but bought or received such assets during the year without using them.

Likewise, there may be tax consequences if a trust operates a cryptocurrency mining business, and the trust receives a bonus as consideration for services rendered.

If the trust received, held or disposed of one or more cryptoassets during the year, you must check “Yes” on line 31 of the return.

Moreover, as of 2024, trusts must complete the Cryptoasset Return (TP-21.4.39-V) and file it with their income tax return. Failure to do so may result in penalties.

For more information about the tax consequences of using cryptoassets in the operation of a business, see guide IN-155-V, Business and Professional Income.

Incorporeal capital property

Since 2017, incorporeal capital property has been depreciable property included in class 14.1 of Schedule B to the Regulation respecting the Taxation Act. It is therefore subject to the usual rules applicable to depreciable property, including the rules regarding the recapture of capital cost allowance (CCA) and capital gains. The half-year rule (50% reduction of the net amount of acquisitions) also applies to property in this class. Transitional rules are in place for property acquired before 2017 that is disposed of in 2017 or later.

Note that property acquired after December 3, 2018, that is qualified intellectual property and that was included in class 14.1 gives entitlement to the additional  30% CCA. Consequently, a trust can claim an additional CCA of 30% of the amount of CCA for the property for the preceding taxation year.

Property of a same class that gives entitlement to the additional 30% CCA must be included in a separate class. The additional CCA does not reduce the undepreciated capital cost (UCC) of the property and cannot be recaptured upon disposition of the property.

Note that as of 2024, the additional 30% CCA does not apply to intellectual property acquired after December 31, 2023. However, it will continue to apply to such property for the remainder of the period applicable to the property, provided that the property meets the requirements and was acquired by December 31, 2023.

For more information concerning incorporeal capital property, see guide IN-155-V, Business and Professional Income, or contact us.

Net business income (or net business loss) allocated by a partnership

Enter on line 55 the net business income (or net business loss) allocated by a partnership.

In the case of a personal trust that is a specified member, complete Part 3 of Schedule B.

Lines 56a to 57 – Farm or fishing income (or loss)

Enter the gross income and the net income (or net loss) from the operation of a farming or fishing business on lines 56a and 56 or on lines 57a and 57, as applicable. The cash or accrual method of accounting can be used to calculate the income. However, you can use the cash method of accounting only if you have elected to do so under federal legislation. Once you have chosen one of these methods, you must use it for each subsequent taxation year. If you wish to change methods, contact us. Enclose an income statement for each farming or fishing business, as well as any information slips, such as the RL-21 slip (boxes A and C), on which such income is shown. If the trust received amounts under a disaster relief program, see guide IN-125-V, The Tax Effects of Financial Assistance Received as a Result of a Disaster.

Fiscal period

See Fiscal period in the instructions for lines 55a and 55.

Restricted farm loss

If the trust's principal source of income for the taxation year is neither agriculture nor a combination of agriculture and another source of income, the amount that the trust can deduct as a farm loss for that year is limited to the lesser of:

• the amount of the farm loss for the year; and
• $2,500 plus the lesser of the following amounts:
  • one-half of the amount by which the farm loss exceeds $2,500,
  • $15,000.

You must enter the deductible amount of the loss on line 56. The non-deductible portion of the loss for the year is a restricted farm loss that can be used to reduce the farm income of the three previous years or the next twenty years.

Sections 205, 207 to 728.1

Incorporeal capital property

Since 2017, incorporeal capital property has been depreciable property included in class 14.1 of Schedule B to the Regulation respecting the Taxation Act. It is therefore subject to the usual rules applicable to depreciable property, including the rules related to the recapture of CCA and capital gains. The half-year rule (50% reduction of the net amount of acquisitions) also applies to property in this class. Transitional rules are in place for property acquired before 2017 that is disposed of in 2017 or later.

Note that property acquired after December 3, 2018, that is qualified intellectual property and that was included in class 14.1 gives entitlement to the additional 30% CCA. Consequently, the trust can claim an additional CCA of 30% of the amount of CCA for the property for the preceding taxation year.

Property of a same class that gives entitlement to the additional 30% CCA must be included in a separate class. The additional CCA does not reduce the UCC of the property and cannot be recaptured upon disposition of the property.

Note that as of 2024, the additional 30% CCA does not apply to intellectual property acquired after December 31, 2023. However, it will continue to apply to such property for the remainder of the period applicable to the property, provided that the property meets the requirements and was acquired by December 31, 2023.

For more information, see guide IN-155-V, Business and Professional Income, or contact us. For instructions on how to calculate farm or fishing income derived from the disposition of incorporeal capital property, see guide IN-120-V, Capital Gains and Losses.

Lines 58a and 58 – Rental income (or loss)

Enter on lines 58a and 58 the gross income and the net income (or net loss) resulting from the rental of property (house, apartment, room or other property).

Note that you must include property income earned in 2024 on cryptoasset activities. To calculate such income, complete a Cryptoasset Return (TP-21.4.39-V). If the trust suffered a loss, enter the amount of the loss, preceded by a minus sign (–). Carry the results from lines 125 and 126 of form TP-21.4.39-V to lines 58a and 58, respectively of the return.

If the trust received amounts under a disaster relief program, see guide IN-125-V, The Tax Effects of Financial Assistance Received as a Result of a Disaster.

To calculate the net income (or net loss) resulting from the rental of immovable property, complete form TP-128.F-V, Income Earned by a Trust from the Rental of Immovable Property.

Labour costs

See Labour costs in the instructions for lines 55a and 55.

Rental income (or loss) allocated by a partnership of which the trust is a specified member

Also enter on line 58 the rental income (or loss) allocated by a partnership of which the trust is a specified member.

In the case of a personal trust, complete Part 3 of Schedule B.

Line 59 – Amount withdrawn from a net income stabilization account

Enter the amount withdrawn from the net income stabilization account Fund No. 2 under the AgriStability, AgriInvest or Agri-Québec program.

Any amount withdrawn from Fund No. 2 of the account is taxable and is considered to be property income for the trust. The income includes amounts received or deemed to have been received from a third party (such as bonuses and government contributions, and the interest on such amounts). Enclose the RL-21 slip and enter on line 59 the amount from box D of the slip.

Death of the beneficiary spouse

Upon the spouse's death, the balance of the account is deemed paid to the trust and must consequently be included in the trust's income. As of 2016, the trust and the legal representative of the deceased spouse can no longer elect to include all or part of the amount in the deceased spouse's final income tax return, rather than in the trust's income tax return. However, under certain conditions, the trust's income can be included in the calculation of the beneficiary's income for the taxation year during which the trust's taxation year ended.

Sections 1, 92.5.2, 656.3 and 657(a)

Line 60 – Income (or losses) relating to a deemed sale applicable to certain trusts

Enter the income (or losses) shown on line 30 of form TP-653-V, Deemed Sale Applicable to Certain Trusts, such as:

• recapture of CCA in the case of depreciable property;
• income (or loss) relating to resource property or land that is included in a business's inventory.

Capital gains (or losses) should not be entered on line 60. Instead, enter them on:

• line 216 or 1216 of Schedule A, depending on when the gains (or losses) were realized;
• line 2216 of Schedule A.1.

Sections 653, 656, 656.1 and 656.2

Line 61 – Other income

Enter the total of all other income of the trust that has not already been entered on lines 50 through 60. For a testamentary trust, this income may be amounts that it received after a death (employment-related income, a death benefit paid under the QPP or the CPP, a pension plan benefit or a benefit from a foreign retirement arrangement or income earned from an registered retirement savings plan [RRSP] or registered retirement income fund [RRIF] after the death).

You must enter on line 61a the code below that corresponds to the type of income reported on line 61:

• 01 Employment-related income (other than a death benefit derived from an office or employment)
• 02 Death benefit derived from an office or employment
• 03 Death benefit paid under the QPP or the CPP
• 04 Income-averaging annuity for artists
• 05 Income earned from an RRSP or RRIF after death
• 06 Additional income of a mutual fund trust
• 07 Other income

If the trust is reporting more than one type of income, enter 99.

Note that you must include interest income earned in 2024 on cryptoasset activities. To calculate such income, complete a Cryptoasset Return (TP-21.4.39-V). Carry the result from line 135 of form TP-21.4.39-V to line 61 of the return and enter code 07 on line 61a.

Code 01 – Employment-related income

In general, employment income paid after an individual's death must be entered in the deceased's income tax return. However, the following income related to the individual's employment must be reported in the income tax return of the individual's succession:

• severance pay payable upon the individual's death that may qualify for a $10,000 exemption (see Death benefit derived from an office or employment below);
• retroactive severance pay (paid after the individual's death), regardless of the date on which the collective agreement was signed;
• refunds, upon the individual's death, of contributions to a pension plan;
• retiring allowance paid after the individual's death, except the portion that the deceased was entitled to, but did not receive before death.

Code 02 – Death benefit derived from an office or employment

A death benefit may also be paid by an employer in recognition of the services rendered in respect of an office or employment. If the death benefit is paid to the trust, the trust can claim an exemption of up to $10,000.

If the benefit is paid over a period of more than one year, the $10,000 exemption must apply in sequence to reduce or cancel the total amount of the benefit payments received.

As of 2016, if the trust must allocate the death benefit to one or more beneficiaries, the benefit can qualify as a death benefit only if the trust is a GRE. In this case, the beneficiaries are entitled to the $10,000 exemption. Refer to the instructions and examples below.

Exemption deducted by the trust

If the trust elects to deduct the exemption from its own income and the net amount of the benefit is not reduced to zero, enter the net amount on line 61 and allocate it to the beneficiary or beneficiaries, as applicable.

Enclose the RL-1 slip issued by the employer of the deceased with the return.

Exemption not deducted by the trust

If the trust does not deduct the exemption, you must enter the gross amount of the benefit on line 61.

Where the death benefit is paid to only one beneficiary and the payments are made over a period of more than one year, the following rules apply:

• For the first year, the exemption applies to the aggregate of the amounts received in the year, to a maximum of $10,000.
• For subsequent years, the portion of the exemption the beneficiary can claim is equal to the maximum exemption of $10,000 minus the aggregate amount of the exemption claimed in previous years.

If the death benefit is paid to more than one beneficiary, the exemption granted to each beneficiary must not exceed the lesser of the following amounts:

• the amount that the beneficiary received in the year;
• the result obtained by multiplying $10,000 by the ratio between the amount the beneficiary received and the total amount of the benefit.

If the benefit payments are made over a period of more than one year, this calculation must be done each year.

Enclose the RL-1 slip issued by the employer of the deceased with the return.

Sections 3 and 4

Code 03 – Death benefit paid under the QPP or the CPP

Enter on line 61 the amount of the death benefit paid under the QPP or the CPP, even if the amount was paid to a third party that paid the funeral expenses.

However, the death benefit may be included in the income of one or more beneficiaries of the trust if the succession has no other source of income, in which case the succession would be released from the obligation to file an income tax return.

Section 317.2

Code 04 – Income-averaging annuity for artists

A testamentary trust that received an amount under an income-averaging annuity for artists may be required to redistribute all or part of the amount to a beneficiary. In this case, you must enter:

• in box G of the beneficiary's RL-16 slip the amount allocated in that regard; and
• “G-10” in a blank box of the slip, followed by the amount of income tax withheld on that amount.

Sections 312(c), 312(d.1) and 669.5

Code 05 – Income earned from an RRSP or RRIF after death

Post-death income from an RRSP or RRIF is shown in box K of the RL-2 slip issued in the succession's name.

Sections 921.1 and 961.16.1

Code 06 – Additional income of a mutual fund trust

The trust can include on line 61 an amount designated as additional income if, as applicable:

• the trust elected to have its taxation year end on December 15;
• the trust is a mutual fund trust throughout the year and has not made a designation under the first paragraph of section 663.1 or the first paragraph of section 663.2 of the Taxation Act.

You must report in Schedule C any portion of additional income that is allocated to a beneficiary during the taxation year (and file an RL-16 slip in the name of the beneficiary accordingly), but can deduct the amount on line 81 of the income tax return for the following taxation year only.

Sections 1121.12 and 1121.13

Code 07 – Other income

Enter the other income received by the trust, such as:

• the recovery of resource deductions (where the cumulative amount of Canadian exploration expenses, Canadian development expenses or foreign resource expenses [box A or box B of the RL-11 slip, or box 28, box 29, box 31, box 60 or box 61 of the RL-15 slip] is negative);
• the qualifying performance income of an athlete, as well as the interest and other income derived from property held by the trust, in the case of an amateur athlete trust;
• accumulated income payments from a registered education savings plan (RESP) (box O of the RL-1 slip).

Sections 330(d) to 330(e.1), 669.1, 851.34 and 904.1

Line 64 – Carrying charges and interest expenses

Enter the amount from line 319 of Schedule B. Carrying charges and interest expenses related to investment expenses include:

• interest paid or payable on amounts borrowed to earn investment income;
• interest on a life insurance policy loan contracted to earn investment income, provided the interest is not added to the ACB of the policy. To claim a deduction in this respect, you must have the insurer complete form TP-163.1-V, Interest Paid on a Loan Taken Out on a Life Insurance Policy, no later than 90 days after the end of the trust's taxation year;
• management and safekeeping fees for shares and securities;
• accounting fees for investment income; and
• fees (other than commissions) paid to a person (or partnership) for advice on the advisability of purchasing or selling securities, or for services relating to the administration or management of securities, if the principal business of the person (or partnership) is providing such advice or services.

Do not include brokerage fees incurred upon the purchase or sale of securities. Brokerage fees paid upon the sale of a security may be deducted from the selling price. Brokerage fees paid to purchase a security must be included in the ACB of the security (lines B and C of Part 1 of Schedule A).

After March 20, 2013, and for any period that begins after December 31, 2013, do not include on line 64 an amount paid or payable under a life insurance policy that is a leveraged insurance policy at the time of payment as such an amount is not considered to be interest.

In the case of a personal trust, you must complete Part 3 of Schedule B.

Sections 157(d), 160, 161 and 163.1

Lines 65 and 66 – Fees paid to the trustee

The fees that the trust paid to the trustee are deductible if they were paid for the purpose of earning business or property income (most of the fees can be deducted directly from the income in question). This means, for example, that the trust may deduct fees paid to the trustee for the administration or management of shares or securities (where the trustee's principal activity includes the provision of such services), but may not deduct fees paid to the trustee for overseeing personal-use property such as a residence.

Enter:

• on line 65, the full amount of the fees paid to the trustee; and
• on line 66, the portion of this amount that is not deductible from income or that is deducted elsewhere in the return.

If an individual is acting as a trustee, other than in the normal course of their activities, the fees paid to the individual are considered employment income. An RL-1 slip must therefore be filed in the name of the trustee no later than the last day of February of the year following the calendar year in which the payments were made.

In the case of a personal trust, you must complete Part 3 of Schedule B if the fees were paid for the purpose of earning investment income.

Sections 80 and 157(d)

Line 69 – Allowable business investment loss

An allowable business investment loss is a capital loss that the trust sustained on the disposition of a share of the capital stock of a Canadian-controlled private corporation (CCPC) all or substantially all of the fair market value (FMV) of whose assets is attributable to assets used in an eligible business that the corporation carries on primarily in Canada. A business investment loss may also be sustained on the disposition of a debt obligation owed by a small business corporation or owed by a CCPC that:

• became bankrupt while carrying on a small business; or
• pursuant to section 6 of the Winding-up and Restructuring Act, was insolvent within the meaning of this Act at the time a winding-up order was rendered but had been carrying on a small business at that time.

In the return, you must enter allowable business investment losses on:

• line 69a, if they were sustained before June 25, 2024 (period 1);
• line 69b, if they were sustained after June 24, 2024 (period 2).

Complete the work chart below to calculate allowable business investment losses.

A loss sustained in one of the following situations is considered to be a business investment loss:

• The corporation that operates the business is a small business corporation at the time of the disposition.
• The trust disposed of the share or debt obligation to a person dealing with the trust at arm's length.
• The trust has made an election whereby it is deemed to have disposed of the share or debt obligation at the end of the year, for nil proceeds, and to have reacquired the share or debt obligation immediately thereafter at nil cost. Consequently, the amount of the loss is equal to the amount of the debt obligation or to the ACB of the share immediately prior to the disposition. The trust must enclose with its return a letter advising us that it is electing to have the provisions of section 299 of the Taxation Act apply to the share or debt obligation.

For more information, see guide IN-120-V, Capital Gains and Losses.

Allowable business investment losses must be reduced by the amounts the trust allocated to the beneficiaries in a previous year and that the trust designated as taxable capital gains that give entitlement to a deduction. The amount of the reduction (line 12 or line 18 of the work chart, as applicable) is considered a capital loss and must be carried to line 219 or line 1219 of Schedule A, depending on when the losses were sustained, or line 2219 of Schedule A.1.

The allowable business investment loss is determined on line 29 of the work chart, and can be deducted on line 69 of the return. If the amount of the allowable business investment loss exceeds the trust's income for the year, the excess amount is included in the calculation of the non-capital loss (see the instructions for line 90 and line 99).

Note that the portion of a non-capital loss that is attributable to the allowable business investment loss can be carried to the three previous taxation years and the ten subsequent taxation years. Any amount that cannot be deducted as a non-capital loss for these years becomes a net capital loss.

Sections 231, 232.1, 264.5, 299 and 300

Line 70 – Other deductions in the calculation of net income

Enter the total of the other expenses that were incurred by the trust to earn income and that have not been included elsewhere in the return. Do not include expenses pertaining to the property of the trust or the personal expenses of the beneficiaries or trustees (funeral expenses and probate fees, for example, are not deductible from income).

You must also enter on line 70a the code below that corresponds to the deduction entered on line 70:

• 01 Fees and expenses incurred to prepare, file or continue an objection or an appeal
• 02 Upkeep and maintenance expenses or taxes for property made available to a beneficiary
• 03 Canadian exploration or development expenses or foreign resource expenses
• 04 Designated employee benefits payable by an employee life and health trust
• 05 Reimbursement of salaries or wages in the case of a GRE
• 06 Reimbursement of certain government benefits in the case of a GRE
• 07 Other deductions

If the trust is claiming more than one of these deductions, enter 99.

Code 01 – Fees and expenses incurred to prepare, file or continue an objection or appeal

Enter the amount of the fees and expenses incurred to obtain advice or assistance in connection with an objection to a notice of assessment for income tax, interest or a penalty under the Taxation Act, or under a tax law of Canada or of a province other than Québec, or to appeal a decision regarding such a notice. The amount must not exceed a reasonable amount.

Section 336(e)

Code 02 – Upkeep and maintenance expenses or taxes for property made available to a beneficiary

Enter the portion of the trust's income that was used to pay, during the year, upkeep and maintenance expenses and taxes for property made available to a beneficiary in accordance with the trust deed, provided the expenses were not already deducted in the trust's financial statements. The amount must not exceed a reasonable amount.

You must report this amount as income allocated to a beneficiary on line 406 of Schedule C (and must therefore also file an RL-16 slip in the beneficiary's name). Also enter this amount on line 74.

Enclose with the return a statement giving full particulars of the amounts paid, and specify the type of expense in each case.

Section 662

Code 03 – Canadian exploration or development expenses or foreign resource expenses

Enter the amount of the deductions for the following expenses:

• Canadian exploration or development expenses (including the basic deduction [100%] for Québec exploration expenses that qualify for an additional deduction);
• Canadian oil and gas property expenses;
• foreign resource expenses.

Note that expenses incurred after February 2015 that are related to environmental studies and community consultations, including studies or consultations conducted in order to obtain an exploration permit, are eligible as Canadian exploration expenses.

To determine the amount of these deductions, refer to the instructions for boxes A, B and D on the back of the RL-11 slip, and the instructions for boxes 28 through 32 and 60 through 62 of the RL-15 slip in the document RL-15.EX, Instructions pour les membres de la société de personnes (see courtesy translation RL-15.EX-T). The deduction for expenses incurred to issue shares and securities related to Québec resources, and renounced in favour of the trust, must be entered on line 94. Any additional deduction for Québec resources must also be entered on line 94.

In the case of a personal trust, you must complete Part 3 of Schedule B if the amount on line 70 includes a deduction for Canadian exploration and development expenses that were incurred elsewhere than in Québec. For more information about trusts subject to a loss restriction event, see Trusts subject to a loss restriction event.

Sections 371, 395, 401, 413, 414, 418.1.10 and 418.7

Code 04 – Designated employee benefits payable by an employee life and health trust

In the case of an employee life and health trust, you must enter on line 70 (rather than on line 81) the designated employee benefits that became payable during the year.

Section 657.1(d)

Code 05 – Reimbursement of salaries or wages in the case of a GRE

Enter the deduction claimed for any salaries or wages that the legal representative of the deceased individual reimbursed, where the salaries and wages were included in the calculation of the individual's income from an office or employment for a previous year. The reimbursement must be made in accordance with an agreement under which any amount paid to the individual to carry out the duties associated with the individual's office or employment must be repaid for any period during which such duties were not carried out.

You can, however, elect to have the reimbursement considered made by the individual in the year of death, rather than by the individual's legal representative. To make the election, send us, separate from any income tax return, form TP-1012.B-V, Carry-Back of a Deduction or Tax Credit, duly completed, along with an amended income tax return for the individual for the year of death, no later than 90 days after the end of the taxation year of the GRE.

Sections 78.1 and 1055.1.2

Code 06 – Reimbursement of certain government benefits in the case of a GRE

Enter the deduction claimed for any government benefit that the legal representative of the deceased individual reimbursed, where the amount was included in the calculation of the individual's income for a previous year.

In the case of a QPP, CPP, Québec parental insurance plan (QPIP) or Employment Insurance benefit (refer to the instructions pertaining to these types of benefits at line 246 in the guide to the personal income tax return), you can elect to have the reimbursement considered made by the individual in the year of death, rather than by the individual's legal representative. To make the election, you must send us, separate from any income tax return, form TP-1012.B-V, Carry-Back of a Deduction or Tax Credit, duly completed, along with an amended income tax return for the individual for the year of death, no later than 90 days after the end of the taxation year of the GRE.

Sections 336(d) and 1055.1.3

Code 07 – Other deductions

Enter any other amount that is deductible in the calculation of the net income of the trust that was not included on lines 50 through 67 of the return.

Line 74 – Upkeep and maintenance expenses or taxes for property used by a beneficiary

Enter, up to a reasonable amount, the portion of the trust's income that was used to pay upkeep and maintenance expenses and taxes for property made available to a beneficiary in accordance with the trust deed. This amount is added to the trust's income to adjust for the fact that it is deducted twice (once in the trust's financial statements or on line 70, and again on line 81).

Section 662

Line 75 – Value of other taxable benefits

Enter the total value of the benefits granted by the trust (other than the benefits included on line 74). These may be amounts paid for the beneficiary's personal or living expenses. As such benefits are not deductible, they must be added to trust income in order to counterbalance the deduction claimed on line 81.

Do not include the value of benefits granted to beneficiaries if the value is deducted from the ACB of their capital interests in the trust because, in this case, the value is not included in the amounts allocated to them.

Enclose a statement giving full particulars of the amount that is entered on line 75. This amount is included in the amount on line 406 of Schedule C.

Sections 257(n)(i.1) and 661

Line 81 – Total amounts allocated to beneficiaries

Complete Schedule C if the trust must allocate income or taxable capital gains to beneficiaries. For instructions, see Schedule C – Summary of Allocations and Designations.

The trust can deduct on line 81 an amount that must not exceed the total of the amounts allocated on line 410 of Schedule C.

However, because of the restrictions mentioned under Exceptions and limits, the deductible amount claimed on line 81 may be less than the amount on line 410 of Schedule C.

Sections 657 and 1121.13

Line 83 – Gross-up of dividends not designated

Enter the amount of the gross-up of dividends not designated by the trust. This amount is the total of the amounts shown on line 326 of Schedule B (see the instructions for line 326).

Section 497

Line 84 – Adjustment of investment expenses

If you completed Part 3 of Schedule B, enter the amount from line 350 of the schedule (if it is positive). This amount (and the amount on line 355) constitutes the total adjustment for the non-deductible portion of investment expenses for 2024.

This amount can be carried back three years and carried forward to any subsequent year only if, in the years concerned, investment income exceeds investment expenses. To carry back an amount, complete form TP-1012.B-V, Carry-Back of a Deduction or Tax Credit, and submit it to us separately from the trust income tax return.

Section 313.10

Line 86 – Carry-over of the adjustment of investment expenses

If, for 2024, the trust's investment income (line 346 of Schedule B) exceeds its total investment expenses (lines 336 and 339 of Schedule B), you can carry over any portion of the total adjustment of investment expenses for previous years (lines 350 and 355 of Schedule B for these years) that was not carried over in a previous year. The amount you carry over cannot be greater than the difference between the trust's investment income and its total investment expenses.

Section 336.6

Line 90 – Net income

If the amount on line 90 is negative, the trust may have sustained a non-capital loss. A non-capital loss cannot be allocated to the beneficiaries, but it can be carried back three years and forward twenty years. In the case of an employee life and health trust, the non-capital loss can be carried forward only three years.

We recommend that you complete Schedule D to calculate a non-capital loss. If you are carrying back a non-capital loss, you must complete Schedule D (for instructions see Schedule D – Carry-Back of a Loss).

Sections 727 and 728

Line 91 – Non-capital losses from other years

Enter the amount of the non-capital losses from other years that are being carried to the year and were not deducted in a previous year. Specify the type of loss by entering one of the following codes on line 91a:

• 01 Non-capital loss
• 02 Farm loss
• 03 Fishing loss
• 04 Restricted farm loss
• 05 Limited partnership loss

If the trust is carrying forward more than one loss, enter 99.

Enclose a statement of changes in loss balances (continuity statement) with the return.

In the case of a personal trust, you must complete Part 3 of Schedule B if the amount on line 91 includes a limited partnership loss.

For information regarding a trust subject to a loss restriction event, see Trusts subject to a loss restriction event.

Sections 727, 728 and 728.0.1

Line 92 – Net capital losses from other years

Enter the amount of the net capital losses from other years that are being carried to the current year. Since the amount being carried over must be deducted from taxable capital gains, line 92 must not exceed line 53, from which the total of the taxable capital gains allocated to beneficiaries (shown on line 81) must be subtracted.

If a net capital loss was sustained in a year in which the capital gain inclusion rate was not 50%, the amount of the net capital loss must be adjusted. To make the adjustment, complete form TP-729-V, Carry-Forward of Net Capital Losses. Carry the result obtained to line 92 of the return.

Enclose with the return either form TP-729-V or a statement of changes in loss balances (a continuity statement).

In the case of a personal trust, you must complete Part 3 of Schedule B if any portion of the amount on line 92 is deducted from taxable capital gains realized on property other than qualified farm or fishing property or QSBCSs.

For information regarding a trust subject to a loss restriction event, see Trusts subject to a loss restriction event.

Net capital loss on precious property

A net capital loss on precious property can be used only to reduce a capital gain realized on other precious property. If you enter a capital gain on lines 208.3 and 1208.3 of Schedule A or line 2208.3 of Schedule A.1, you can carry a net capital loss sustained in any of the seven previous years to lines 208.4 and 1208.4 of Schedule A or line 2208.4 of Schedule A.1. Always use losses in the order in which they were sustained, from earliest to latest.

Sections 266, 267, 729 and 729.1

Line 93a – Adjustment for the purpose of calculating the CNIL

If a deduction corresponding to code 03 is included on line 70 and the deduction includes Québec resource expenses that do not qualify for an additional deduction, enter, for information purposes, an amount that corresponds to 50% of the total of the amounts in boxes A-1, A-2 and B-1 of the RL-11 slips and in boxes 28-1, 28-2, 29-1, 60-1, 60-2 and 61-1 of the RL-15 slips.

This amount is used to calculate the cumulative net investment loss (CNIL). It must be included on line 50 of form TP-668.1-V, Taxable Capital Gains of a Trust That Give Entitlement to a Deduction, and also added to the amount on line 336 of Schedule B.

Line 94 – Other deductions in the calculation of taxable income

Enter on line 94 all other deductions that the trust may claim in calculating its taxable income. You must specify the type of deduction claimed by entering one of the following codes on line 94a:

• 01 $2,000 deduction, if the trust is created with respect to a non-profit organization's property (see “Non-profit organization” under Types of trusts)
  Section 997(f)
• 02 Deduction for foreign income that is exempt from federal or Québec income tax under a tax agreement
  Section 725(a)
• 03 Deduction for share and security issue expenses that relate to Québec resources and that were renounced in favour of the trust
  Section 726.4.17.10
• 04 Additional deductions for Québec resources (the deductions for exploration and development expenses must be entered on line 70)
  Sections 726.4.9 and 726.4.17.1
• 05 Income-averaging deduction for a trust that is a certified forest producer
  Section 726.42
• 06 Deduction other than a deduction under one of codes 01 through 05

If the trust is claiming more than one deduction, enter code 99.

Line 98 – Other adjustment of investment expenses

If you completed Part 3 of Schedule B, enter the amount obtained on line 355 of the schedule (if it is positive). The amount on line 98 (plus the amount on line 84, if applicable) constitutes the total adjustment for the non-deductible portion of investment expenses.

This adjustment can be carried back three years and carried forward to any subsequent year only if, in the years in question, investment income exceeds investment expenses. To carry back an amount, complete form TP-1012.B-V, Carry-Back of a Deduction or Tax Credit, and submit it to us separately from the trust income tax return.

Section 737.0.1

Line 98.1 – Adjustment of deductions (all or part of the deduction claimed for a trust that is a certified forest producer)

If, after March 17, 2016, a trust that is a certified forest producer claimed the deduction of a portion of its income derived from non-retail sales of timber produced in a private forest, you must include all or part of the amount deducted in the calculation of the trust's taxable income.

If a sale of timber subject to the income-averaging mechanism was concluded before March 10, 2020, all or part of the amount deducted respecting the sale for a year must be included in the calculation of the trust's taxable income for one or more of the seven following years. For each of the six taxation years following the year for which the deduction was claimed, the trust must include in the calculation of its taxable income at least 10% of the amount deducted, up to the amount by which the amount deducted exceeds the aggregate of the amounts already included. In the seventh year following the year for which the deduction was claimed, the trust must include the portion of the amount that has yet to be included.

If a sale of timber subject to the income-averaging mechanism was concluded after March 9, 2020, all or part of the amount deducted respecting the sale for a year must be included in the calculation of the trust's taxable income for one or more of the ten following years. For each of the ten taxation years following the year for which the deduction was claimed, the trust must include in the calculation of its taxable income at least 10% of the amount deducted, up to the amount by which the amount deducted exceeds the aggregate of the amounts already included.

For more information, see Certified forest producer in the instructions for lines 55a and 55.

Sections 726.42 to 726.44

Line 99 – Taxable income

The result obtained on line 99 (if it is positive) is the trust's taxable income. You cannot enter a negative amount on line 99.

Negative amount on line 97

If line 97 is negative and line 99 would be negative if a negative amount could be entered, the trust may have sustained a non-capital loss. Such a loss cannot be allocated to the beneficiaries, but it can be carried back three years and forward twenty years.

We recommend that you complete Schedule D to calculate the non-capital loss. To carry back the loss, you must complete Schedule D (see the instructions for Schedule D – Carry-Back of a Loss).

Sections 727 and 728

Sections 716.0.1.4 and 752.0.10.15.6

Food donations made by a trust that carries on a food processing business

The eligible amount for food donations can be increased by 50% if the donations are made by a trust that carries on a food processing business. The donations must also have been made to a registered charity that was a member of the Food Banks of Quebec network (either a Moisson member or associate member).

Eligible food donations include milk, oil, flour, sugar, frozen vegetables, pasta, prepared meals, baby food and infant formula.

Sections 752.0.10.1 and 752.0.10.15.6

Charitable donations

Charitable donations are donations made to qualified donees that are not gifts of cultural property, ecological gifts or gifts of musical instruments (for instructions see Other gifts).

Limit regarding the charitable donation of a work of art

If, during the taxation year, the trust donated a work of art, the value of the donation can be deducted as income allocated to the beneficiaries of the trust (line 81) or may qualify for a tax credit for donations and gifts (line 123), provided the donee sells the work of art on or before December 31 of the fifth year following the calendar year in which the donation was made. If the trust cannot take the donation into account at the time the return is filed because a receipt has not yet been issued, it can request an adjustment from us after obtaining the receipt using form TP-646.R-V, Request for an Adjustment to a Trust Income Tax Return.

The five-year time limit does not apply if the work of art was donated:

• to a registered museum, if the gift is cultural property;
• to a registered Canadian municipality, the Government of Canada or a provincial government or an organization that acquired the work as part of its primary mission;
• to a charity that is a recognized institution or establishment for the purpose of the 50% increase in the eligible amount of the donation, if the work of art is a public work of art (refer to the information below).

Increase in the eligible amount of a donation of a work of art

The eligible amount of a donation of a work of art to a museum in Québec or a museum that has the status of a recognized or accredited museum from the Ministère de la Culture et des Communications can be increased by 25%.

However, if a trust makes a charitable donation to certain donees and the donated property is a public work of art, the eligible amount of the donation can be increased by 25% or 50%, as applicable. The trust must enclose with its return a certificate, issued by the Ministère de la Culture et des Communications, confirming the fair market value (FMV) of the public work of art.

Thus, unless the 25% increase has already been applied because the work of art is a public work of art that was donated to a Québec museum, the eligible amount of the gift can be increased by 25% if the donee was:

• the Québec government (if the donee was an educational institution that is a mandatary of the State, refer to the following paragraph);
• a Québec municipality or a registered municipal or public body performing a function of government in Québec (other than a school service centre governed by the Education Act) and, according to the certificate issued by the Ministère de la Culture et des Communications, the work was acquired by the municipality or body in accordance with its acquisition and conservation policy for public works of art.

The eligible amount of a donation of a public work of art can be increased by 50% if the donee was:

• an educational institution that is a mandatary of the State;
• a school service centre governed by the Education Act or by the Education Act for Cree, Inuit and Naskapi Native Persons;
• a registered charity whose mission is education and that is:
  • an educational institution established under a Québec statute, other than an educational institution that is a mandatary of the State,
  • a general and vocational college (CEGEP),
  • a university-level institution referred to in one of paragraphs 1 to 11 of section 1 of the Act respecting educational institutions at the university level, or
  • an accredited private educational institution for the purposes of the grant under the Act respecting private education.

In this case, the certificate issued by the Ministère de la Culture et des Communications must also confirm that the work of art acquired by the donee will be installed in a place that is accessible to the students and that its conservation can be assured.

Increase in the eligible amount of a gift of an immovable intended for cultural purposes

If a trust makes a gift of a building located in Québec capable of housing artists' studios or one or more cultural organizations, the eligible amount of the gift can be increased by 25%. The trust must enclose with its return the following documents issued by the Ministère de la Culture et des Communications: an eligibility certificate for the building and a certificate confirming the FMV of the building (including the value of the land on which the building is located).

The gift must have been made to one of the following donees:

• a Québec municipality or a registered municipal or public body performing a function of government in Québec;
• a registered charity operating in Québec in the field of arts or culture;
• a registered cultural or communications organization;
• a registered museum.

Amount of charitable donations and carry-over of the unused portion

The trust is entitled to a tax credit for the total eligible amount of charitable donations. This includes donations made by the trust during the taxation year and the previous five years, as long as a tax credit has not already been granted for those donations in a previous taxation year or, if the trust is a succession, in the year of death or the previous year.

The trust may choose to claim only a portion of its total donations (to the maximum amount allowed). The unused portion can be carried forward five years.

Other gifts

The table below shows the other gifts for which the trust can claim a tax credit.

Increase in the eligible amount of a gift of cultural property

The eligible amount of a gift can be increased if the cultural property is:

• a work of art given to a museum in Québec or a recognized or accredited museum;
• a public work of art; or
• immovable intended for cultural purposes.

For more information, see the section on charitable donations. Note that eligible donees and the documents to enclose with the return are listed in the table above.

Gift of property with undeniable ecological value

Since March 22, 2017, the following rules have applied to gifts of property with undeniable ecological value:

• The municipalities and municipal or public bodies performing a function of government that receive such a gift must prove to the Ministère de l'Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs that the gifts received will be protected in the long-term.
• Private foundations are no longer authorized to receive gifts of property with undeniable ecological value.
• Certain gifts of personal servitudes are considered gifts of property with undeniable ecological value, provided they meet certain conditions (for example, the personal servitude must have a term of not less than 100 years).

Carry-over of the unused portion

The total eligible amount of cultural property and musical instruments can include gifts made by the trust during the taxation year and the previous five years, provided a tax credit for those gifts has not already been granted. For ecological gifts, it includes gifts made during the taxation year and in the previous ten years.

The trust can choose to claim only a portion of its total gifts. The unused portion can be carried forward five years (ten years in the case of an ecological gift). Refer to the carry-over rules for donations, which also apply to gifts of ecological property made by a GRE.

Sections 657, 657.1, 752.0.10.1, 752.0.10.2, 752.0.10.6, 752.0.10.11.1, 752.0.10.11.2, 752.0.10.15, 752.0.10.15.1, 851.33 and 999.2

Line 124 – Foreign tax credit

If the trust was resident in Québec on the last day of the taxation year, it may be entitled to a tax credit for the foreign income tax paid on its foreign income.

The credit is based on the income tax that the trust paid on foreign income or earnings to any level of government of a foreign country. You cannot claim the foreign tax credit for an amount of income tax that the trust could have avoided or recovered from the foreign government.

The calculation of the foreign tax credit must be based only on the amounts retained by the trust. Do not take into account foreign income allocated to the beneficiaries or foreign income tax paid on such income.

Complete form TP-772-V, Foreign Tax Credit, to calculate the tax credit. The income tax paid on business income and non-business income must be calculated separately. The tax credit granted for non-business income is limited to the amount by which the total of the foreign income tax paid exceeds the foreign tax credit granted by the CRA for such income. You must complete a separate form for each foreign country.

Deemed resident trust

In certain cases, foreign income of a deemed resident trust is deemed to be from the foreign country in which the trust was resident at the end of the taxation year or immediately before the trust ceased to exist (if it ceased to exist in the year). All foreign income tax paid by such a trust for the year is deemed to have been paid to the government of the foreign country.

Contact us for more information.

Sections 772.6, 772.8 and 595

Line 125 – Dividend tax credit

The trust can claim a dividend tax credit for ordinary dividends and eligible dividends that it kept. Enter on line 125 the total of the amounts from line 328 of Schedule B. For more information, see the instructions for line 328.

Line 128 – Tax credit claimed by the trust as a designated beneficiary of a designated trust

The trust may be required to complete the Information Return to Be Completed by the Beneficiary of a Designated Trust (form TP-671.9-V), as a beneficiary of such a trust. If it is also a designated beneficiary of the trust, it may be entitled to a tax credit (line 25 of form TP-671.9-V).

Section 772.15

Line 130 – Additional income tax resulting from the alternative minimum tax (AMT)

Complete form TP-776.42.F-V, Alternative Minimum Tax of a Trust, if the provisions respecting this tax apply to the trust.

A trust may be required to pay the AMT if it includes any of the following in its return:

• taxable dividends;
• taxable capital gains;
• its share of a loss sustained by a partnership, where its interest in the partnership is a tax shelter;
• a loss created or increased by a capital cost allowance deduction or any deduction for carrying charges and interest expenses, with regard to rental property (including certain films);
• a loss or a deduction pertaining to a tax shelter;
• carrying charges deducted with respect to the purchase of an interest in a partnership of which the trust is a specified member;
• carrying charges deducted with respect to the purchase of an interest in a partnership that owns a film or rental property, where the carrying charges create or increase a loss attributable to such sources.

Exceptions

A trust is not subject to the AMT for a taxation year if, throughout that taxation year, it is a mutual fund trust, an insurance segregated fund trust, a master trust (a trust of which each beneficiary is a trust governed by an registered pension plan [RPP], a pooled registered pension plan [PRPP], a voluntary retirement savings plan [VRSP] or a DPSP), an employee life and health trust or an employee ownership trust.

A spousal trust created after 1971, a joint spousal trust or an alter-ego trust are also not subject to alternative minimum tax for the year in which the person concerned (the beneficiary spouse, surviving spouse or deceased individual, as applicable) dies.

As of 2024, GREs are no longer subject to AMT. Moreover, when calculating AMT, only QDTs can take advantage of the $175,000 basic exemption (indexed starting in 2025).

Sections 776.42 to 776.46 and 776.50 to 776.65

Line 132 – Additional income tax resulting from the AMT carried forward to 2024

The trust may be entitled to deduct all or part of the AMT relating to a previous year. To determine the amount to enter on line 132, complete form TP-776.42.F-V, Alternative Minimum Tax of a Trust.

Sections 752.12 and 752.14

Line 134 – Deduction for logging tax

As a rule, if the trust engaged in logging operations in Québec, it may be entitled to deduct one-third of the amount of tax it paid when it filed form TPZ-1179-V, Logging Operations Return. Contact us for more information about this deduction.

Section 1183

Line 136 – Special tax respecting certain refundable tax credits, a registered education savings plan (RESP) or an income-averaging annuity for artists

Enter the amount of special tax payable by the trust.

Special tax respecting certain tax credits

During the taxation year, an amount may have been refunded or credited to the trust in order to offset an expense for which the trust obtained a tax credit in a previous taxation year. In this case, the trust must pay a special tax.

This rule applies to certain tax credits (for example, the tax credit for the reporting of tips, the tax credits for R&D and the tax credit for an on-the-job training period).

Contact us for information on how to calculate the special tax.

Sections 1129.40 and 1129.41.3

Special tax respecting an RESP

After the death of a person who was an RESP subscriber, the trust may have received an accumulated income payment under the plan, and be required to pay additional income tax. Complete form TP-1129.64-V, Special Tax Relating to a Registered Education Savings Plan, and file it with the trust income tax return on or before the filing deadline for the return.

Sections 890.15, 904.1 and 1129.64

Special tax respecting an income-averaging annuity for artists

If the trust is a testamentary trust that has not allocated the entire payment of an income-averaging annuity for artists to its beneficiaries, it must pay a special tax equal to the portion of the income tax withheld on the payment that is not allocated to the beneficiaries.

Section 1129.68

Line 137 – Income tax on the taxable distributions amount

In the case of a SIFT trust, enter the amount from line 180 of Schedule E.

If the trust has an establishment in Québec and an establishment elsewhere, you must use the business allocation formula used by corporations to calculate the income tax. Contact us for more information.

Section 1129.71

Line 138 – Income tax payable on specified immovables

In the case of a specified trust, enter the amount from line 671 of Schedule F.

You must complete the “Additional information about the trust” section for any trust resident in Canada other than a trust created by law or by a judgment. The information requirements are mandatory for certain trusts for taxation years ending after December 30, 2023.

You must enter the additional information requested for each person who, over the course of the year is:

• a trustee;
• a beneficiary;
• a settlor of the trust;
• a person who can exert control over the trustee's decisions with respect to the allocation of income or capital from the trust under the terms of a mandate or other agreement, or otherwise.

However, excluded trusts are not required to provide such information.

If a trust fails to file the income tax return with the required additional information by the deadline, it is liable to a penalty of $1,000 and, starting on the second day, an additional penalty of $100 per day until the return with the additional information is filed, to a maximum of $5,000.

6.6 Information about the person who completed the return

If the person who completed the return is not the trustee, the liquidator of the succession, or the trustee's or liquidator's representative, or if the administrator of the trust or contact person completed the return and their address is not the same as the trustee's address, provide the requested information about the person who completed the return or the corporation they represent on line 165.

6.7. Certification

The trustee, the liquidator of the succession or the representative of the trustee or liquidator must print their last name, first name and position or title, specify the date on which the return was completed, and sign the return.

The representative of the trustee or liquidator of the succession must enclose form MR-69-V, Authorization to Communicate Information or Power of Attorney, with the return, unless this form was previously filed and remains valid for the taxation year in question.

7.1. Schedule A − Taxable Capital Gains and Designated Net Taxable Capital Gains

You must complete Schedule A if the trust disposed of or is deemed to have disposed of capital property during the taxation year.

7.1.1

If the trust is not a personal trust, it can report and, if applicable, designate its capital gains (or losses) to beneficiaries by completing Schedule A.1 instead of Schedule A.

In certain sections of this guide, we use the term “sale” to designate a transaction by which, as a rule, the trust transfers its property with or without consideration. A “deemed sale” occurs if, for example, a debt obligation has become a bad debt, there has been a change in the use of property, certain events happen to certain trusts (see Deemed sale applicable to certain trusts) or property has been stolen or destroyed.

We use the term “property” to refer to capital property.

The trust may realize a capital gain or sustain a capital loss on the sale of property, including crytoassets.

To find out what special rules apply to a loss on the disposition of property involving an affiliated person, see Schedule C – Summary of Allocations and Designations.

For more information on capital gains, see guide IN-120-V, Capital Gains and Losses

This section contains information about the tax treatment of the trust where:

• the trust is a personal trust that distributes property to one of its beneficiaries (see Distribution of property by a personal trust);
• the trust is no longer resident in Canada or becomes resident in Canada (see Trust that is no longer resident in Canada or that becomes resident in Canada);
• the trust is a graduated rate estate (GRE) that is filing an income tax return for its first taxation year, and:
  • it makes an election referred to in section 1054 of the Taxation Act with respect to a capital loss or terminal loss it sustained on the sale of a property (see Losses – Election referred to in section 1054 of the Taxation Act for the first taxation year of a GRE), or
  • it makes an election under section 1055.1 of the Taxation Act with respect to the decrease in the value of an option granted to a deceased person at the time it was exercised or sold (see Security option – Election made under section 1055.1 of the Taxation Act for the first taxation year of a GRE);
• the trust must report a deemed sale (see Deemed sale applicable to certain trusts);
• the trust is a SIFT trust that is converted into a business corporation (see Converting a trust into a corporation – Property distribution and loss trading).

Section 231

7.1.1. Distribution of property by a personal trust

A personal trust that is not covered by points 1 through 12 under Exceptions to deemed sales is deemed not to be dealing with its beneficiaries at arm's length. A person not dealing at arm's length with one of the trust's beneficiaries is also considered not to be dealing at arm's length with the trust. Therefore, if the trust transfers property to one of these persons for no consideration or for a consideration that is less than the fair market value (FMV) of the property at the time of transfer, the property is considered to have been transferred at its FMV.

If the trust transfers property to a beneficiary in settlement of all or a part of the beneficiary's income interest in the trust, the property is considered to have been transferred at its FMV at the time of transfer.

However, if the trust transfers property to a beneficiary in settlement of all or a part of the beneficiary's capital interest in the trust, the transfer has no tax consequences for the trust. In this case, the rollover rule applies with the following presumptions:

• The trust is deemed to have transferred the property for a selling price equal to its cost amount.
• The beneficiary is deemed to have acquired the property at a price equal to its cost amount.

Exceptions to the rollover rule are given below under “Transfer of property at its FMV.”

A detailed statement of all property transferred to the beneficiaries during the taxation year concerned (including the date of transfer and the names of the beneficiaries) must be enclosed with the return. You must also check the box on line 21 of the return.

Sections 1, 685 and 688

Transfer of property at its FMV

Notwithstanding the rollover rule applicable to the transfer of property by a personal trust in settlement of a capital interest, the property is deemed to have been transferred at its FMV in the following situations:

• The trust makes an election to that effect under federal legislation for the year of the transfer. However, if the trust was not resident in Canada at the time of the transfer, the election can be made only with regard to taxable Canadian property, with regard to property used in a business carried on in Canada by the trust through an establishment in Canada before the transfer or with regard to property forming part of the inventory of such a business. This election is automatically deemed to be made for the purposes of Québec legislation. Therefore, you must send us proof that the election was made with the CRA and written notification no later than the filing deadline for the return or 30 days after the election was made (whichever is later).

Section 688.0.0.1

• In the case of a non-resident trust, the beneficiary concerned makes an election to that effect under federal legislation. The property transferred must not be taxable Canadian property, property used in a business carried on in Canada by the trust through an establishment in Canada before the transfer or property forming part of the inventory of such a business. In this situation, the adjusted cost base (ACB) of the capital interest is equal to zero. This election is automatically deemed to be made for the purposes of Québec legislation. Therefore, the beneficiary must send us proof that the election was made with the Canada Revenue Agency (CRA) and written notification no later than the filing deadline for the beneficiary's return or 30 days after the election was made (whichever is later).

Section 688.0.0.2

• The property was transferred to a beneficiary other than the spouse (in the case of a spousal trust created after 1971), the settlor (in the case of an alter ego trust), or the settlor or their spouse (in the case of a joint spousal trust), no later than the earlier of the following dates:
  • the date on which the trust ceased to exist;
  • the date on which the trust is deemed to have reacquired the property immediately after the first deemed sale covered in one of points 2, 3 or 4 under Deemed sale applicable to certain trusts.

Section 691

• The trust is a revocable or blind trust and the following conditions are met:
  • the income attribution rule applies, at a given time, to any property of the trust (see Revocable or blind trust);
  • the property was transferred, in the lifetime of the person from whom the trust received the property, to a beneficiary other than that person, their spouse or former spouse, or a trust for the benefit of their spouse.

Section 691.1

• The property was transferred to a non-resident beneficiary. However, the property must not be immovable property located in Canada, Canadian resource property, timber resource property, property used in a business carried on in Canada (capital property or depreciable property in class 14.1 of Schedule B to the Regulation respecting the Taxation Act), property forming part of the inventory of such a business, entitlement to pension benefits and similar rights (under an registered pension plan [RPP], a pooled registered pension plan [PRPP], a voluntary retirement savings plan [VRSP], a tax-free savings account [TFSA], a first home savings account [FHSA], a registered retirement savings plan [RRSP], a registered retirement income fund [RRIF], a deferred profit-sharing plan [DPSP], a registered education savings plan [RESP], etc.), an interest in a life insurance policy in Canada (other than a segregated fund policy), or a share in the capital stock of an investment corporation owned by non-residents.

Section 692

• The property was transferred to a beneficiary other than a partnership or corporation that, in a qualifying disposition, had previously transferred the property (or property for which it was substituted) to the trust.

Section 691.2

• The transfer constitutes a payment of the trust's income, capital gains or non-taxable dividends for the year, even if the beneficiary is deemed not to have disposed of their capital interest on this occasion. At the time of the transfer, if the trust is resident in Canada and realizes a capital gain, it can elect not to take into account the tax consequences resulting from the allocation of the capital gain to one or more of its beneficiaries (that is, the trust does not deduct the capital gain on line 81 of its return and the beneficiaries do not have to report the capital gain). For more information, see Election referred to in section 688.1.1 of the Taxation Act.

Sections 688.1 and 688.1.1

7.1.2. Trust that is no longer resident in Canada or that becomes resident in Canada

Trust that is no longer resident in Canada

Any trust resident in Québec that ceases to reside in Canada at some time during the year is deemed to have sold its property for the FMV of the property at that time. This rule does not apply to certain property, in particular, immovable property located in Canada, Canadian resource property, timber resource property, property used in a business carried on by a trust through an establishment in Canada (capital property or depreciable property in class 14.1 of Schedule B to the Regulation respecting the Taxation Act), property forming part of the inventory of such a business, entitlement to pension benefits and similar rights (under an RPP, a PRPP, a VRSP, an RRSP, a RRIF, a DPSP, a TFSA, an FHSA, an RESP, etc.), or an interest in a life insurance policy in Canada (other than a segregated fund policy).

The trust may defer payment of any income tax owing further to the deemed sale, if it provides sufficient security. Contact us for more information.

Section 785.2

Trust that becomes resident in Canada

An inter vivos trust that becomes resident in Canada after March 19, 2012, is deemed to have disposed of, immediately before becoming resident in Canada, any specified immovable held at that time, for proceeds equal to the FMV of the immovable at that time, and to have reacquired the immovable at a price equal to the proceeds of disposition.

Consequently, such a trust must include in its income tax return the taxable capital gain (or allowable capital loss) and the recapture of capital cost allowance (or the terminal loss) that may result from the deemed disposition.

If the trust plans to sell the immovable at a later time, you must complete and send us form TP-785.2.6-V, Notice of the Planned Disposition of a Specified Immovable Held by an Inter Vivos Trust at the Time the Trust Became Resident in Canada. This will enable us to ensure that the tax payable on the deemed disposition is paid, and allow us to issue the trust a compliance certificate (form TPF-785.2.7-V, Certificate Concerning the Planned Disposition of a Specified Immovable Held by an Inter Vivos Trust at the Time the Trust Became Resident in Canada).

7.1.3. Losses – Election referred to in section 1054 of the Taxation Act for the first taxation year of a GRE

In a succession's first taxation year, the deceased's legal representative may have sold:

• one or more of the succession's properties, resulting in a capital loss or in capital losses in excess of capital gains; or
• all of the succession's depreciable property in a prescribed class, resulting in a terminal loss.

Amending the deceased's income tax return

Under federal legislation, the legal representative can elect to report these losses in the deceased's income tax return for the year of death, rather than in the income tax return of the GRE. However, since 2016, such an election is valid only if the succession is a GRE.

If there is a terminal loss, the amount of the loss must not exceed the amount that would have been the total of the succession's non-capital loss and farm loss without the election.

For the purposes of Québec legislation, no such election can be made unless it is made under federal legislation, in which case it is automatically deemed to be made. Therefore, if the legal representative makes this election with the CRA, the representative must send us proof that the election was made and written notification along with a duly completed copy of form TP-1012.B-V, Carry-Back of a Deduction or Tax Credit, by the latest of the following dates:

• 30 days after the election was made;
• the filing deadline for the deceased's principal or separate return; or
• the filing deadline of the first return of the GRE.

The legal representative must clearly write on the deceased's return “Election referred to in section 1054” unless the return has already been filed at the time of the election. For more information on filing the principal and separate returns of a deceased person, see the Guide to Filing the Income Tax Return of a Deceased Person (IN-117-V).

If this election is made, check box 23 of the return.

If the sale of non-depreciable property resulted in a capital loss (deducted on either one of lines 200, 201, 202, 203, 204, 205, 206, 207 or 208.3 of Schedule A or one of lines 1200, 1201, 1202, 1203, 1204, 1205, 1206, 1207 or 1208.3 of that schedule, depending on when the loss was sustained) and this loss is deemed to become the deceased person's loss in accordance with the election referred to in section 1054, you must enter the amount of the loss on line 211 or 1211 of Schedule A.

In the case of depreciable property, you must not take into account, in the calculation of the succession's business or property income, the terminal loss that is subject to the election referred to in section 1054.

Contact us for more information.

Sections 1054 and 1055

7.1.4. Security option – Election made under section 1055.1 of the Taxation Act for the first taxation year of a GRE

In the first taxation year of a succession, the legal representative of the deceased may have exercised or sold a security option (that is, an option to purchase shares of the capital stock of a corporation or mutual fund units) granted to the deceased by their employer.

Amending the deceased's income tax return

As of 2016, the legal representative can deduct a loss from an office or employment on line 207 of the deceased's principal income tax return if the succession is a GRE and the following requirements are met:

• a taxable benefit for the option was included in the deceased's principal income tax return; and
• the value of the option has decreased since the day of death, that is, its value at the time of death was greater than its value at the time it was exercised or sold.

The loss is equal to the amount by which A exceeds B, where:

• A represents the value of the taxable benefit; and
• B represents the amount by which the value of the option at the time it was exercised or sold exceeds the amount that the deceased paid to acquire the option.

However, if a deduction for the taxable benefit for the option was claimed on line 297 of the principal income tax return, the loss must be reduced by the same percentage used to calculate the deduction.

To deduct the loss, the legal representative must file form TP-1.R-V, Request for an Adjustment to an Income Tax Return, in the name of the deceased, and specify that they are making the election under section 1055.1 of the Taxation Act. The form must be filed by the filing deadline for the deceased's principal income tax return, or by the filing deadline for the first return of the GRE, whichever is later. For more information, see the Guide to Filing the Income Tax Return of a Deceased Person (IN-117-V).

If you are making an election under section 1055.1, check box 23 on the succession's return. Contact us for more information.

Note that the excess (A minus B) must be used to reduce the ACB of the option.

Sections 1000 and 1055.1

7.1.5. Deemed sale applicable to certain trusts

On specific dates during a trust's existence, it is considered to have sold its property, the land included in the inventory of its businesses and its Canadian and foreign resource property for the FMV of the property on those dates, and to have repurchased the property immediately thereafter for the same amount. Each of these dates is called the “date of deemed sale.”

Generally, the date of the first deemed sale is one of the following dates:

1. for a pre-1972 spousal trust, January 1, 1993, or the day on which the beneficiary spouse dies, whichever is more recent;
2. for a post-1971 spousal trust, the day on which the beneficiary spouse dies;
3. for a joint spousal trust, the day on which the surviving spouse dies;
4. for an alter ego trust, the day on which the settlor dies or, if the trust makes an election in its first income tax return, the 21st anniversary of the day on which the trust was created (in the latter case, the settlor cannot benefit from the rollover rule at the time of the transfer of property to the trust, nor can the settlor be exempted from alternative minimum tax);
5. for a trust to which a person transferred property in circumstances under which rollover rules apply (as part of a qualifying transfer or a qualifying disposition), the day on which the person dies, if they are the only person to have an absolute or contingent right as a beneficiary of the trust, and if the transfer did not result in a change in the beneficial ownership of the property. To find out what constitutes a qualifying transfer or qualifying disposition, see Rollover rule;
6. for all other trusts, the 21st anniversary of the day on which the trust was created.

A deemed sale occurs every 21 years on the same date after the first deemed sale.

The following dates are also considered to be dates of deemed sale:

7. the date on which property was distributed to a beneficiary because of the beneficiary's capital interest in the trust, if the trust contracted a debt to finance the distribution and one of the reasons for this was to avoid the income tax payable on the death of an individual;
8. the date on which the settlor ceased to be resident in Canada, if the settlor made a qualifying transfer of property to the trust and it is reasonable to believe that the transfer was made with a view to the settlor's departure (no sale is deemed to have taken place in the case of certain property, for example, taxable Canadian property or property included in the inventory of a business carried on in Canada by the settlor at the time of departure);
9. for a deemed resident trust, the day immediately preceding the date on which it is deemed to have ceased to be resident in Canada, either because it no longer has any resident contributors or resident beneficiaries, or because it becomes an exempt foreign trust (this excludes certain property, such as taxable Canadian property or property included in the inventory of a business carried on in Canada).

Since 2016, if the beneficiary of a trust mentioned in points 1 to 5 dies, the taxation year of the trust is deemed to end at the end of the day of the death, and a new taxation year is deemed to begin at the start of the following day.

Sections 454.2(c), 653, 654 and 776.45(e)

Exceptions to deemed sales

Deemed sales (as explained above) do not apply to exempt property or to certain types of trusts.

Deemed sales do not apply to the following trusts:

1. an amateur athlete trust;
2. an employee trust;
3. an employee ownership trust;
4. a master trust;
5. a trust established under an RPP, a PRPP, a VRSP, a profit-sharing plan (PSP), a DPSP, an RESP, a registered disability savings plan (RDSP), a registered supplementary unemployment benefit plan (RSUBP), an RRSP, a RRIF, an employee benefit plan, a TFSA or an FHSA;
6. an employee life and health trust;
7. a trust governed by a foreign retirement arrangement;
8. an insurance segregated fund trust;
9. a retirement compensation arrangement trust;
10. a religious organization;
11. a trust all or substantially all of whose property is held for the purpose of providing benefits to individuals, for their current or former office or employment;
12. a trust governed by an eligible funeral arrangement or a cemetery care trust;
13. a unit trust;
14. a trust in which all interests were indefeasibly vested on the date of the deemed sale. However, such a trust cannot be exempted from the deemed sale if it is:
    • a post-1971 spousal trust, an alter ego trust or a joint spousal trust;
    • a trust that contracted a debt in order to finance the allocation of property to a beneficiary because of the beneficiary's capital interest in the trust, if one of the reasons for the trust's action was to avoid the income tax payable on the death of an individual;
    • a trust that was resident in Canada on that date if, on that date, the trust's non-resident beneficiaries held interests whose FMV represented more than 20% of the FMV of the interests held by all the beneficiaries;
    • a trust that elected, in its return for its first taxation year ending after December 31, 1992, not to be exempt from the 21-year rule;
    • a trust whose terms, on that date, provide that all or part of a beneficiary's interest expires after a specified period (including a trust under which the interest expires upon the death of the beneficiary). In this case, the terms provide that a beneficiary's interest in the trust expires as soon as the trust distributes, to the beneficiary or to their succession, property whose FMV corresponds to the FMV of the interest immediately before the distribution, the trust may be exempted from the deemed sale.

Section 647

The table below outlines the options available to trusts subject to the deemed sale rules and lists the forms to complete (where applicable).

7.1.5.1. Deemed sale form

Complete form TP-653-V, Deemed Sale Applicable to Certain Trusts, to report the income, capital gains and losses resulting from a deemed sale in the taxation year.

If property covered by the deemed sale was actually sold in the same taxation year, report the actual sale on Schedule A but do not complete form TP-653-V to report the deemed sale of the property, unless the trust is a spousal trust, a joint spousal trust, an alter ego trust or a self-benefit trust.

7.1.5.2. Deferral of the income tax payable further to a deemed sale

A trust that is required to report income or a capital gain on a deemed sale can elect to pay all or part of the excess income tax resulting from the sale in equal annual instalments (the number of instalments must not exceed 10).

The trust must file form TP-1031.1-V, Election by a Trust to Pay in Instalments the Income Tax Resulting from a Deemed Sale Applicable to Certain Trusts, duly completed, by the date on which it is required to file the income tax return for the taxation year in which the deemed sale is considered to have taken place. The first instalment must be paid on this date, which is 90 days after the end of the taxation year concerned. Subsequent instalments must be paid on or before the anniversary of this date. As such, if the election is made with respect to part of the excess income tax, the first instalment must be paid by the same date as the income tax payable for the year.

Interest, which must be added to the amount of each instalment made after the first instalment date, is calculated at the prescribed rate and capitalized daily from the date on which the income tax would normally have been payable to the date on which the instalment is actually paid. For the prescribed interest rates, see Interest Rates on Debts.

Sufficient security must be provided respecting the amount of income tax to be paid in instalments. Contact us for information concerning the security required.

Section 1031.1

Deemed disposition of interests in a qualified public corporation

As of February 22, 2017, a trust can elect to defer, under certain conditions and for a maximum of 20 years, the payment of Québec income tax attributable to the deemed disposition of a qualified share of a qualified public corporation.

The base total payroll in Québec of a public corporation is its average annual payroll in Québec calculated over a three-year period ending on the given taxation year, taking into account the total payroll of the corporations associated with the public corporation, if applicable.

If the trust elects to defer the payment of income tax payable resulting from the deemed disposition of its interest in a qualified public corporation, check box 30 of the return and enclose form TP-1033.18-V, Election to Defer the Payment of Income Tax Resulting From the Deemed Disposition of a Trust's Interest in a Qualified Public Corporation. The trust must provide security deemed satisfactory no later than the deadline for paying the trust's income tax for the taxation year in which the deemed disposition occurred.

Sections 1033.14 to 1033.16 and 1033.18 to 1033.27

7.1.6. Converting a trust into a corporation – Property distribution and loss trading

This section provides information about the tax treatment applicable to a specified investment flow-through (SIFT) trust or a real estate investment trust (REIT) upon its conversion into a corporation. The term “distribution” means the distribution of property during a SIFT trust wind-up event.

7.1.6.1. Distribution to a sole beneficiary and the tax consequences of reorganizing into a corporation

This section applies to the trust if it distributes its property to a sole beneficiary and all of the following conditions are met:

• The distribution is a SIFT trust wind-up event.
• The trust is either:
  • a SIFT wind-up entity whose sole beneficiary, at all times at which the trust makes a distribution, is a taxable Canadian corporation; or
  • a trust whose sole beneficiary, at all times at which the trust makes a distribution, is another trust that is a SIFT wind-up entity described in the point above.
• Where the trust is a SIFT wind-up entity, the distribution must have occurred no more than 60 days after the first of the following events:
  • the first distribution made by the trust;
  • the first distribution made to the trust by another trust.
• Where the property is shares of the capital stock of a taxable Canadian corporation:
  • the property was not acquired by the trust as part of a distribution referred to in section 688.3 of the Taxation Act (a distribution that is a SIFT trust wind-up event made by another trust);
  • the trust made an election under subparagraph 88.1(1)(d)(ii) of the federal Income Tax Act.

After such a distribution, the rules for the winding up of a Canadian subsidiary apply, as if:

• the trust were a taxable Canadian corporation (referred to as a “subsidiary”) other than a private corporation;
• the beneficiary were a taxable Canadian corporation other than a private corporation, where the beneficiary is a SIFT wind-up entity;
• the distribution made by the trust corresponded to the winding-up of the subsidiary;
• the beneficiary's interest in the trust corresponded to shares of a single class of shares of the capital stock of the subsidiary;
• the ACB of the beneficiary's interest immediately before the distribution corresponded to the proceeds of disposition of the shares immediately before the distribution;
• the beneficiary last acquired control of the subsidiary and of each corporation (including any trust that is deemed to be a corporation) controlled by the subsidiary at the time at which the beneficiary last became a majority-interest beneficiary of the trust, except for the purposes of sections 564.2 to 564.4.2 of the Taxation Act.

Sections 569.0.1 and 569.0.2

7.1.6.2. Restrictions on loss trading

If, during the conversion of a SIFT trust or a REIT into a corporation, several beneficiaries dispose of their interests in the trust in exchange for shares of the capital stock of the corporation, control of that corporation and of each corporation controlled by it immediately before the exchange is deemed to have been acquired at the time of the exchange by a person or group of persons. This will restrict the trading of the corporation's losses further to the conversion.

However, if a SIFT wind-up corporation is the sole beneficiary of a trust and the trust controls another corporation, on a distribution of the shares of the other corporation that is part of a SIFT trust wind-up event, the SIFT wind-up corporation will be deemed not to acquire control of the other corporation because of that distribution. This will not limit the trading of the losses of the other corporation.

Section 21.3.1 (3rd par.)

7.1.7.How to complete Schedule A

Report capital gains (or losses) in section A or B of Part 1. If the trust is not a personal trust, it can report and, if applicable, designate its capital gains (or losses) to beneficiaries by competing Schedule A.1 instead of Schedule A.

If applicable, complete Part 3 to determine the capital gains that will be designated to the trust's beneficiaries.

Selling price (lines A of Part 1)

Enter the price at which the property was sold.

Expenses incurred for the sale (lines B of Part 1)

Enter the amount of expenses incurred for the sale of the property. These are generally expenses that relate to the sale, including certain costs incurred to repair property intended for sale, finder's fees and other commissions, lawyer's fees, broker's fees, surveyor's fees, transfer duties and other reasonable expenses directly related to the sale.

Such expenses cannot be deducted in the calculation of the trust's income, but may be used to reduce the selling price of the property, thereby reducing the capital gain or increasing the capital loss on the sale. In the case of depreciable property, the net selling price (after subtracting the expenses) must be used to calculate the undepreciated capital cost (UCC) of the class to which the property belongs, if it is lower than the ACB.

Sections 234 and 236

Adjusted cost base (lines C of Part 1)

Enter the ACB of the property. The ACB of a property usually corresponds to its purchase price (also called “acquisition cost”), plus or minus certain adjustments provided for in the Taxation Act. The ACB may differ from the original cost (total of the purchase price and the expenses incurred for the acquisition, such as legal fees, surveying costs, evaluation fees and brokerage fees) if changes were made to the property between the time it was purchased and the time it was sold. For example, the cost of improvements to a building can be added to the building's original cost.

Sections 252, 253 and 255

Line 200 – Qualified farm or fishing property

If the trust is a personal trust, calculate the net amount of the capital gains and capital losses on the qualified farm or fishing property.

Sections 668.4 and 726.6

Line 201 – Qualified small business corporation shares

If the trust is a personal trust, calculate the net amount of the capital gains and capital losses on the qualified small business corporation shares (QSBCSs) that are not qualified farm or fishing property. Do not take into account the allowable business investment loss, which must be entered on line 69 of the return.

Sections 726.6 and 726.6.1

Line 202 – Capital gains (or losses) on qualified property

Enter the net amount of capital gains (or losses) on qualified property (qualified farm or fishing property or QSBCSs) allocated to the trust by another trust or by a partnership.

Sections 105 and 105.3

Line 203 – Capital gains (or losses) on shares involved in a qualifying business transfer

Enter the net capital gains and losses allocated to the trust in relation to shares involved in a qualifying business transfer. You must also provide the requested information about the transfer, the corporation that disposed of the shares and the employee ownership trust to which the transfer was made.

Line 204 – Other shares, mutual fund units and interest in an insurance segregated fund trust

Calculate the net amount of the capital gains and capital losses on shares other than QSBCSs, mutual fund units and interests in an insurance segregated fund trust.

Donated securities

Do not include capital gains realized on the gift of the following securities:

• a security listed on a designated stock exchange;
• a mutual fund corporation share;
• a mutual fund unit;
• an interest in an insurance segregated fund trust.

The tax exemption also applies to gifts made (or deemed to be made) to a qualified donee by a GRE at the time the donated property (or property substituted for the property) is transferred or by a succession that:

• has ceased to be a GRE solely because it has existed for more than 36 months after the death; and
• transfers property to the donee within 60 months following the death.

The trust may still have to report a capital gain on line 210 if:

• it received an advantage in recognition of or as consideration for such a gift; or
• the security is included in a class of property consisting of flow-through shares.

For more information, see the guide Capital Gains and Losses (IN-120-V).

Section 231.2

Note that special rules apply to identical property, that is, property in a given group that is identical in every respect to the other property in the group (for example, securities from the same class, such as shares of the capital stock of a corporation or mutual fund units). For more information, see guide IN-120-V.

Section 259

Line 205 – Bonds, debt obligations, promissory notes and other similar securities

Calculate the net amount of the capital gains and capital losses on the bonds, debt obligations, promissory notes and other such property. Such a capital gain or loss may be determined from the RL-18 slip (or statements of account or transaction receipts). 

Donated securities

Do not include capital gains realized on the gift of a bond, debenture, promissory note, mortgage, or other similar security that is issued or guaranteed by the Government of Canada or a provincial government or by one of its mandataries.

The tax exemption also applies to gifts made (or deemed to be made) to a qualified donee by a GRE at the time the donated property (or property substituted for the property) is transferred or by a succession that:

• has ceased to be a GRE solely because it has existed for more than 36 months after the death; and
• transfers property to the donee within 60 months following the death.

The trust may still have to report a capital gain on line 210 if it received an advantage in recognition of or as consideration for such a gift.

Section 231.2

Line 206 – Immovables and depreciable property

Calculate the net amount of the capital gains and capital losses on the immovable property that is not personal-use property, and the total capital gains on depreciable property.

Where the selling price of the property is greater than its ACB, a capital gain results. (The ACB of depreciable property is its capital cost.)

The sale of depreciable property may also give rise to a recapture of capital cost allowance (CCA). No capital loss can be sustained on such property; however, there may be a terminal loss if all the property in the property's class is sold.

A recapture of CCA, like a terminal loss, must be taken into account in the calculation of business income (line 55 of the return), farm income (line 56) or fishing income (line 57). However, terminal losses and a recapture of capital cost allowance (CCA) resulting from the sale of rental property must first be reported on form TP-128.F-V, Income Earned by a Trust from the Rental of Immovable Property.

Since 2017, incorporeal capital property has been depreciable property included in class 14.1 of Schedule B to the Regulation respecting the Taxation Act. It is therefore subject to the usual rules applicable to depreciable property, including the rules regarding the recapture of CCA and capital gains. The half-year rule (50% reduction of the net amount of acquisitions) also applies to property in this class. Transitional rules are in place for property acquired before 2017 that is disposed of in 2017 or later.

Note that property acquired after December 3, 2018, that is qualified intellectual property and that was included in class 14.1 gives entitlement to the additional 30% CCA. Consequently, the trust can claim an additional 30% of the of CCA claimed for the property for the preceding taxation year.

Property of a same class that gives entitlement to the additional 30% CCA must be included in a separate class. The additional CCA does not reduce the UCC of the property and cannot be recaptured upon disposition of the property.

Note that the additional 30% CCA has been abolished and, as of 2024, does not apply to property acquired after December 31, 2023. However, it will continue to apply to such property for the remainder of the period applicable to the property, provided that the property meets the requirements and was acquired by December 31, 2023.

For more information concerning incorporeal capital property, refer to the guide Business and Professional Income (IN-155-V).

If the trust realized a capital gain on a gift of ecological property (land with ecological value, a real servitude or, since March 22, 2017, a personal servitude encumbering such land), see the instructions for line 210.

Sections 231.2, 248, 249, 252 and 253

Line 207 – Personal-use property

Enter the total capital gains on personal-use property.

The personal-use property of a trust includes property intended primarily for the personal use or enjoyment of a beneficiary of the trust or a person related to the beneficiary. Such property includes personal and household effects, automobiles, boats, residences, cottages and antiques.

The trust may be required to report a capital gain if, during the year, it sold such property for more than its ACB. A capital loss may not be deducted for personal-use property other than precious property (line 206).

Sections 287 to 290 and 300

Principal residence

A personal trust is generally exempt from income tax on the capital gain realized on the sale of property designated as a principal residence for all years in which it was owned by the trust, provided certain requirements are met. As a rule, a residence can be designated as a principal residence if:

• it is ordinarily inhabited by a specified beneficiary or their child, spouse or former spouse, and no other property is designated as a principal residence by any of these persons or by the trust; or
• the trust made an election under federal legislation to change the use of the property, either from being used to earn income to become the principal residence, or from being the principal residence to start being used to earn income.

Since 2017, to be eligible for the principal residence exemption, the specified beneficiary of a qualified trust must have been resident in Canada in the year for the property to be considered the trust's principal residence.

In the paragraph above, a qualified trust is a trust that falls under one of the following categories:

• First category: a spousal trust, a joint spousal trust, an alter ego trust or certain trusts for the exclusive benefit of the settlor during the settlor's lifetime. Depending on the type of trust, the specified beneficiary of the trust must be either the settlor or the settlor's spouse or former spouse.
• Second category: a qualified disability trust (QDT) whose electing beneficiary for the year is:
  • a specified beneficiary of the trust; and
  • the spouse, de facto spouse, former spouse, former de facto spouse or child of the settlor of the trust.
• Third category: a trust for a minor child of deceased parents whose specified beneficiary for the year is an individual who meets the following conditions:
  • The individual's parents are not alive at the beginning of the year.
  • One of the parents is a settlor of the trust.
  • The individual is under 18 at the end of the year.
• Fourth category: a trust for which only a specified beneficiary (qualifying individual) may receive or otherwise obtain the use of, during the beneficiary's lifetime, any of the income or capital of the trust. The trustees are required to consider the needs of the beneficiary (including their comfort, care and maintenance) when determining whether to pay them an amount.

The specified beneficiary for the year means a qualifying individual who:

• is, in the year,
  • the settlor of the trust,
  • the child, grandchild, great-grandchild, father, mother, grandfather, grandmother, great-grandfather, great-grandmother, brother, sister, uncle, aunt, nephew or niece of the settlor of the trust or of the spouse, de facto spouse, former spouse or former de facto spouse of the settlor, or
  • the spouse, de facto spouse, former spouse or former de facto spouse of the settlor of the trust, or any person described in the previous bullet point;
• is resident in Canada during the year;
• is eligible for the disabilty tax credit.

In the case of a joint spousal trust, a QDT or a trust for a minor child, there can be more than one specified beneficiary in a given taxation year.

As a rule, for years ending after October 2, 2016, a trust can designate a principal residence for Québec income tax purposes, provided the property was so designated for federal income tax purposes for the same year. No designation can be made for the purposes of Québec legislation unless it is made with the CRA.

Transitional rules are in place for trusts that do not qualify under the new rules and had a principal residence on December 31, 2016, that was disposed of after 2016. These trusts can also take advantage of the principal residence exemption on the capital gains accrued until the end of 2016.

For more information, see guide IN-120-V, Capital Gains and Losses.

The trust must complete form TP-274.F-V, Designation of Property as a Principal Residence of a Personal Trust, and enclose the form with the return for the year in which the principal residence is sold.

Where the principal residence is transferred to a beneficiary (or to the beneficiary spouse, in the case of a testamentary spousal trust created after 1971) in settlement of all or part of the beneficiary's capital interest in the trust, the trust is deemed to have sold the principal residence for its cost amount (since the rollover rule applies). However, the trust can elect under federal legislation to consider to have sold the residence for its FMV. For the purposes of Québec legislation, no such election can be made unless it is made under federal legislation, in which case it is automatically deemed to be made. Therefore, if the trust makes this election with the CRA, you must send us proof that the election was made and written notification no later than the filing deadline for the return or 30 days after the election was made (whichever is later). The trust must also enclose with these documents form TP-274.F-V. If, further to the election, the trust realized a capital gain, the capital gain may be tax-exempt if the conditions in the first paragraph of this section have been met. Further to the election, the beneficiary is deemed to have purchased the residence for its FMV.

If the trust fails to send us a copy of any document filed with the CRA by the prescribed deadline, it will be liable to a penalty of $25 per day, up to $2,500.

Election concerning the change in use of a property

If a trust makes or had previously made an election under section 284 or 286.1 of the Taxation Act, in accordance with subsection 45(2) or 45(3) of the federal Income Tax Act, a property can be designated as the trust's principal residence for a maximum period of four additional years, even if the property was not ordinarily inhabited during that period by a specified beneficiary or the specified beneficiary's spouse, former spouse or child. The four-year period can be extended indefinitely if certain requirements are met for taxation years in which a change of workplace (whether it is the workplace of the specified beneficiary or their spouse) prevents the specified beneficiary from meeting the requirement of ordinarily inhabiting the property.

Since 2017, measures have applied to the distribution of a principal residence made by a personal trust. The principal residence can be given to the beneficiary by rollover if:

• The trust owned or co-owned the property at the end of 2016.
• During the first taxation year of the trust that begins after 2016, the trust is not a qualified trust (a trust that belongs to one of the four categories described above).
• The property could be designated by the trust as its principal residence for the taxation year during which the disposition occurs if the requirement that the trust be a qualified trust were not taken into account.

If the principal residence is given to the beneficiary by rollover, it is deemed to have been owned by the beneficiary since the last time the trust acquired the property.

Since January 1, 2023, a trust can no longer designate a flipped residence as a principal residence. For more information, see Flipping Your Property (Home or Residential Complex).

Sections 21.4.7, 272, 274.0.1, 274.0.2, 274.1.1, 274.2, 275.1, 277, 285 and 688.0.1

Line 208 – Precious property

Calculate the net amount of the capital gains and capital losses on precious property. Precious property includes:

• prints, etchings, drawings, paintings, sculptures, and any similar work of art;
• jewellery;
• rare folios, manuscripts and books;
• stamps; and
• coins.

Since precious property is a type of personal-use property, refer to the notes in the instructions for line 207 for details about the selling price and ACB of personal-use property.

Carry-over of a net loss

Losses sustained on precious property during the year can be deducted only from gains realized on other precious property in the year. If a net loss is entered on line 207, it can be used to reduce the net gains realized on precious property in the three previous years and the seven subsequent years. A loss that is carried forward is entered on line 207 of Schedule A for the subsequent year concerned, and a loss that is carried back must be entered in Schedule D for the year in which the loss is sustained (see Schedule D – Carry-Back of a Loss).

Sections 265 to 269

Line 209 – Non-qualified investments (under an RRSP, a RRIF, an RDSP, a TFSA or an FHSA) and capital gains to which the 100% rate applies further to the disposition of an interest in a partnership

If the trust was established under an RRSP, a RRIF, an RDSP, a TFSA or an FHSA, calculate the net amount of capital gains and losses realized on the disposition of non-qualified investments during the year. Enter this amount directly on line 230 since the inclusion rate for such capital gains and losses is 100%.

Sections 905.0.13(b), 921.3(b), 935.24(b) and 961.16

Line 210 – Adjusted amount of capital gains resulting from the donation of certain property

The capital gains realized on gifts of certain securities, on gifts of musical instruments and on ecological gifts made to a charitable organization or another qualified donee are tax-exempt.

The tax exemption also applies to gifts made (or deemed to be made) to a qualified donee by a GRE at the time the donated property (or property substituted for the property) is transferred or by a succession that:

• has ceased to be a GRE solely because it has existed for more than 36 months after the death; and
• transfers property to the donee within 60 months following the death.

If the trust received an advantage from gifts of certain securities or ecological gifts, it must report the portion of the capital gain that is proportional to the value of the advantage (referred to as the “adjusted amount of capital gains resulting from the donation of certain property”). In the case of ecological gifts, the certificate issued by the Ministère de l'Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs confirming the FMV of the gift must be enclosed with the return.

Sections 231.4 and 232

Line 211 – Capital losses for which the election referred to in section 1054 of the Taxation Act is made

If the trust is a succession that disposed of property during its first taxation year and sustained a net capital loss as a result, enter the total amount of capital losses that are transferred to the deceased person in accordance with an election referred to in section 1054 of the Taxation Act (see Losses – Election referred to in section 1054 of the Taxation Act for the first taxation year of a GRE).

Since 2016, the election to enter the losses in the income tax return of the deceased for the year of death has been valid only if it is made by the legal representative of a GRE.

Line 213b – Capital gains (or losses) on other property

Enter the net amount of capital gains and losses on other property (that is not qualified property) that are allocated to the trust by another trust or by a partnership.

Line 213c – Capital gains (or losses) on other property as shown on the RL-16 slips

For information purposes, enter the net amount of capital gains and losses on property other than qualified property (amount from box A minus amount from box H) shown on the RL-16 slips. This amount is included on line 213b.

Line 216 – Net amount of capital gains (or losses) from a deemed sale applicable to certain trusts

Enter the net amount of capital gains and losses shown on line 21 of form TP-653-V, Deemed Sale Applicable to Certain Trusts.

For more information, see Deemed sale applicable to certain trusts.

Line 217 – Cryptoasset capital gains (or losses)

Enter the net cryptoasset capital gains (or losses) realized before June 25, 2024, as shown on line 65 of the Cryptoasset Return (form TP-21.4.39-V). For cryptoasset capital gains (or losses) realized after June 24, 2024, carry the amount from line 98 of form TP-21.4.39-V to line 1217 of Schedule A of the trust return.

As of 2024, the trust must complete form TP-21.4.39-V and file it with its income tax return if it owned, acquired, disposed of or used one or more cryptoassets during the taxation year.

Note that, to report income from the use of one or more cryptoassets or from a mining operation, you must determine whether this income is considered a capital gain (or loss) or business or property income (or loss). If the cryptoassets were not disposed of in the course of carrying on a business, they constitute capital property for the trust, and the amount to be reported is considered a capital gain (or loss).

For more information see, guide IN-120-V, Capital Gains and Losses, and guide IN-155-V, Business and Professional Income.

Line 219 – Capital loss from a reduction in a eligible business investment loss

Enter the amount calculated on line 12 or 18 (depending on the date the business sustained the loss) of the work chart that you must complete to calculate the amount for line 69 of the return.

Line 221 – Reserve for the previous year

If a reserve was deducted for the previous taxation year, enter it as a capital gain on line 221 of Schedule A or line 2221 of Schedule A.1. Complete column A in Part 2 of Schedule A if you have not already done so.

Line 223 – Reserve for the current year

If the trust realized a capital gain during the current year or a previous year, but did not receive the total amount of the selling price by the end of the year concerned, a reserve can be deducted on line 223 or 1223 (depending on when the gain was realized) for the portion of the selling price the trust will receive after the taxation year.

The deductible amount of the reserve is equal to one of the following amounts, whichever is least:

• the capital gain prorated to the portion of the selling price of the property that is payable to the trust at the end of the year;
• the amount corresponding to:
  • 4/5 of the capital gain, for the year the property is sold,
  • 3/5 of the capital gain, for the year after the year the property is sold,
  • 2/5 and 1/5 of the capital gain and 0, for the next three years respectively;
• the reserve deducted in the trust's federal return (T3).

If the amount deducted in the federal return is the maximum amount deductible, the amount deducted on line 223 or 1223 (depending on when the gain was realized) must be at least equal to this maximum amount but it must not exceed the amounts mentioned in the first two bullets above.

Complete columns B1 and B2 in Part 2 of Schedule A if you have not already done so.

Line 230 – Taxable capital gains (or net capital loss)

The result obtained on line 230 constitutes the net amount of the taxable capital gains or the allowable capital losses for the year.

If the amount is a net gain, carry it to line 53 of the return. If the amount is a net loss, it can be used only to reduce taxable capital gains reported in the previous three years or in subsequent years (until it is deducted in full). If you want to carry a loss to a previous year, see the instructions for Schedule D – Carry-Back of a Loss. The trust cannot allocate a net capital loss to its beneficiaries, except in the case of an insurance segregated fund trust or a revocable or blind trust that must allocate a capital loss sustained on transferred or loaned property.

Sections 231, 232, 236, 729, 851.21, 1012 and 1012.1

Line 240 to 250 – Designated net taxable capital gains

If the trust was resident in Canada throughout the taxation year, complete lines 240 through 250 to determine the net taxable capital gains that may be designated to one or more beneficiaries. The beneficiaries must also be resident in Canada (unless the trust is a mutual fund trust throughout the year). In your calculation, you must subtract any capital losses from other years that have been carried to 2024, since these losses reduce the trust's taxable capital gains and, consequently, the amount of gains that may be designated.

If the trust designates taxable capital gains under subsection 104(13.2) of the federal Income Tax Act, refer to the measure respecting these elections under Election referred to in sections 663.1 and 663.2 of the Taxation Act.

Section 668

For 2024, you can report the trust's capital gains (or losses) by completing Schedule A.1 (instead of Schedule A), provided the trust is not a personal trust. 

Complete the following:

• Part 1 of Schedule A.1 to report capital gains (or losses) realized by the trust;
• Part 2 to calculate the net taxable capital gains that can be designated to the trust's beneficiaries, if applicable.

7.3 Schedule B – Investment Income, Gross-Up of Dividends Not Designated and Adjustment of Investment Expenses

Complete Schedule B if the trust earned investment income or incurred carrying charges during the taxation year. Enclose the schedule with the return, along with all information slips received by the trust (for example, RL-3 slips, RL-15 slips and RL-16 slips).

Lines 300 to 303 – Actual amount of dividends from taxable Canadian corporations

Enter the actual amount of taxable dividends received or deemed received from taxable Canadian corporations on lines 300 and 301, except:

• capital gains dividends (box I of the RL-3 slip), which must be reported on line 213b of Schedule A; and
• dividends received under a dividend rental arrangement, which must be entered on line 307.

Include dividends credited through banks, trust corporations, brokers, etc., even if the trust did not receive the related RL slips and information slips.

On line 300, enter the eligible dividends received and, on line 301, the ordinary dividends received.

These dividends qualify for the dividend tax credit, either for the trust or for beneficiaries that are individuals to whom allocated income has been designated as dividends from taxable Canadian corporations. For dividends received or deemed received after December 31, 2023, any trust resident in Québec on the last day of a taxation year can claim the dividend tax credit for the year. Moreover, such a trust can deduct the total amount of the dividend tax credit to which it is entitled for the year from its income tax payable without taking into account the ratio (between the income earned in Québec and the income earned in Québec and elsewhere or in Canada for the year) used to determine its income tax payable for the year.

If the trust received a non-taxable dividend, such as a capital dividend from a Canadian-controlled private corporation, the dividend must not be included in the trust's income. Furthermore, if the trust was resident in Canada throughout the year, it must allocate the portion of the dividend that became payable during the year to the beneficiaries. You must advise the beneficiaries not to include the dividends in the calculation of their income. You must also enclose with the trust income tax return a statement containing the following information:

• the name of the corporation that paid the non-taxable dividend; and
• the names of the beneficiaries and the portion of the dividend payable in the year to each of them.

Non-taxable dividends (other than capital dividends) can be used to reduce the adjusted cost base (ACB) of the shares on which the dividends were paid. This can affect the calculation of the capital gain (or loss) resulting from a subsequent sale of the shares.

Sections 21.32, 257(n), 497, 501, 502, 667, 686 (3rd par.), 1106, 1113 and 1116

Lines 305 to 309 – Other investment income from Canadian sources

Various types of income must be reported on these lines, the most common being bond, bank and mortgage interest and taxable dividends that do not give entitlement to the tax credit for dividends (such as those received under a dividend rental arrangement).

You must also report interest on income tax refunds received in the year. Interest credited to the trust's account by a financial institution is deemed, under the Taxation Act, to have been received by the trust.

Other investment income to be reported by the trust on line 308 may be shown in box O of an RL-1 slip, in box E, H or J of an RL-3 slip, in box 7 of an RL-15 slip or in box G of an RL-16 slip.

Sections 87(c), 92 and 92.1.1

Lines 310 to 313 – Foreign investment income

Enter all gross foreign investment income in Canadian dollars. To convert a foreign currency to Canadian dollars, use the exchange rate in effect at the time the income was received by or credited to the trust. If the income was received over the entire year, you may use the average annual exchange rate. For information on the exchange rate, consult the Bank of Canada website.

This income may qualify for a foreign tax credit, either for the trust (see the instructions for line 124) or for beneficiaries whose allocated income has been designated as foreign investment income.

Sections 87(c) and 772.6

Lines 315 to 319 – Carrying charges and interest expenses

Enter, on the appropriate lines, the carrying charges and interest expenses incurred by the trust. Amounts incurred to earn both Canadian and foreign investment income must be apportioned in a reasonable manner between the two types of investment income (enclose the calculations with the return).

Note that the trust cannot deduct trailing commissions or the management expense ratio for its mutual funds because they are taken directly out of the funds' net performance.

In the case of carrying charges, also enclose a list providing both the type of charges and the amount. In the case of interest expenses, complete lines 315a through 315f.

Sections 157(d) and 160 and the following

Line 326 – Amount of the gross-up of dividends not designated

The total of the results on line 326 corresponds to the amount of the gross-up of the dividends included on line 303 that are not designated as dividends from taxable Canadian corporations.

Gross-up rate for eligible dividends

For eligible dividends received or deemed received in 2023 or 2024, the gross-up rate is 38% of the actual amount of dividends.

Gross-up rate for ordinary dividends

For ordinary dividends received or deemed received in 2023 or 2024, the gross-up rate is 15% of the actual amount of dividends.

If the income allocated to beneficiaries in the 2024 taxation year is designated as dividends, we consider that the beneficiaries received the dividends in 2024.

Section 497

Line 328 – Dividend tax credit

The total of the amounts on line 328 represents the trust's dividend tax credit.

Rate of the tax credit for eligible dividends

The rate of the tax credit for eligible dividends is 11.7% of the gross-up amount of dividends received in 2024 (which represents 0.4249 of the amount of the gross-up).

For a graduated rate estate (GRE) whose taxation year began in 2023, the rate of the tax credit for eligible dividends is 11.7% of the gross-up amount of dividends received in 2023 (which represents 0.4249 of the amount of the gross-up).

Rate of the tax credit for ordinary dividends

The rate of the tax credit for ordinary dividends is 3.42% of the gross-up amount of dividends received in 2024 (which represents 0.2622 of the amount of the gross-up).

For a GRE whose taxation year began in 2023, the rate of the tax credit for ordinary dividends is 3.42% of the gross-up amount of dividends received in 2023 (which represents 0.2622 of the amount of the gross-up).

For dividends received or deemed received after December 31, 2019, only a trust resident in Québec on the last day of a taxation year can claim the dividend tax credit for the year. Moreover, such a trust can deduct the total amount of the dividend tax credit to which it is entitled for the year from its income tax payable without taking into account the ratio (between the income earned in Québec and the income earned in Québec and elsewhere or in Canada for the year) used to determine its income tax payable for the year.

Section 767

Line 332 – Fees paid to the trustee

Enter the amount of fees paid to the trustee for the purpose of earning property income (line 67). Do not include fees that are included in the amount on line 331 and those that are included in the calculation of rental income.

Line 335 – Other investment expenses

Enter other investment expenses, such as:

• repayments of inducements or of interest received; and
• 50% of the resource expenses that correspond to code 03 on line 70, other than the portion of these expenses that constitutes expenses incurred in Québec (expenses entered in boxes A-1, A-2, B-1 and D of the RL-11 slips and in boxes 28-1, 28-2, 29-1, 32, 60-1, 60-2, 61-1 and 62 of the RL-15 slips).

Sections 336.5 and 336.5.1

Line 343 – Taxable capital gains that do not qualify for a deduction

Enter the taxable capital gains amount that does not qualify for the capital gains deduction on eligible property. Add any taxable capital gain that was allocated to the trust by another trust and that does not qualify for the deduction to this amount, which is either:

• the amount on line 23 of form TP-668.1-V, Taxable Capital Gains of a Trust That Give Entitlement to a Deduction; or
• the amount on line 53 of the return if the trust did not earn a capital gain on qualified farm or fishing property or a qualified small business corporation share.

Line 345 – Other investment income

Enter other investment income, such as:

• the portion of ordinary annuities that constitutes income (box B of the RL-2 slip);
• income accrued under a life insurance policy (box J of the RL-3 slip);
• inducements received; and
• 50% of the recovery of resource deductions if such a recovery is reported on line 61.

7.4. Schedule C – Summary of Allocations and Designations 

Schedule C is a summary of all amounts allocated to the trust's beneficiaries during the taxation year and, if applicable, designated according to type. In addition to completing this schedule, you must prepare an RL-16 slip in each beneficiary's name. This means that if you amend or cancel an RL-16 slip, you must file an amended Schedule C.

In this schedule and in its instructions, the term “beneficiary” means any person to whom the trust must allocate income or a taxable capital gain. This person can be a beneficiary that holds an interest in the trust or a transferor to which the income attribution rule applies (see Income attribution rule), as well as the electing contributor of a deemed resident trust (see Election to be an electing contributor).

On the RL-16 slip for each beneficiary, enter the portion of trust income allocated to the beneficiary and, if applicable, the dividend tax credit and foreign income tax (see the Guide to Filing the RL-16 Slip: Trust Income [RL-16.G-V] for more information). If the trust is not a personal trust, enter the beneficiary's share in the cost base adjustment of capital interest in the trust (column 4 of line 417 of Schedule C).

Sections 657 and 657.1

7.4.1. Allocations of amounts

When you allocate an amount to a beneficiary, you are stating the amount that the beneficiary is required to include in their income for the taxation year in which the trust's taxation year ends (referred to as the “year concerned” below). The amount may belong to one of the following types:

• the portion of the trust's income that became payable to the beneficiary in the year concerned;
• the portion of the trust's income paid in the year concerned (up to a reasonable amount) for upkeep and maintenance expenses or taxes for property used by the beneficiary in accordance with the terms of the trust deed;
• the value of any other benefit granted to the beneficiary in the year concerned. Such a benefit cannot be deducted by the trust, and its inclusion on line 81 of the return is counterbalanced by the addition of an equivalent amount on line 75;
• the portion of the trust's accumulating income for the year concerned that is allocated to the beneficiary (see Accumulating income allocated to a preferred beneficiary);
• the portion of the trust's income for the year concerned allocated to a transferor covered by the income attribution rule or to the electing contributor of a deemed resident trust, as applicable.

Allocated income that is subject to specific designations must be entered on lines 400 through 405 of Schedule C. Amounts that are not designated must be reported on line 406. For more information, see Designations of income and taxable capital gains.

The total of the amounts allocated to the beneficiaries (line 410) can be deducted on line 81 of the trust's return, subject to certain restrictions (see points 2, 4 and 5 under Exceptions and limits).

Sections 661 to 663 and 667

7.4.1.1. Designations

Designation is optional for some amounts and mandatory for others (such as the dividend tax credit, the foreign income tax credit and the cost base adjustment of a capital interest).

Designations of income and taxable capital gains

As a rule, income allocated by a trust to a beneficiary is considered to be property income derived from an interest in the trust.

However, the trust may designate certain income that it allocated to its beneficiaries, so that the source of the income is identified. For instance, a trust may designate income as a pension benefit allocated to the surviving spouse, as a taxable dividend paid by a Canadian corporation or as a capital gain.

The beneficiary may therefore claim the deductions or credits applicable to such income. For example, the beneficiary can:

• claim the amount for retirement income;
• claim the dividend tax credit;
• claim the taxable capital gains deduction; or
• include in their income only 50% of a capital gain.

A trust resident in Canada throughout the year may therefore designate income as:

• taxable dividends from taxable Canadian corporations;
• foreign non-business income;
• income from an income-averaging annuity for artists;
• net taxable capital gains;
• foreign business income; and
• capital losses (in the case of an insurance segregated fund trust).

Since 2016, the designation of certain benefits allocated by the trust to its beneficiaries has been limited to GREs that were resident in Canada throughout the year. Only this type of succession can designate income as:

• pension benefits qualifying for a tax credit;
• the portion of a death benefit from an office or employment that qualifies for an exemption;
• retiring allowances that can be transferred;
• single pension payment that can be transferred.

You must enter the designated income on the appropriate lines of Schedule C. The share of each beneficiary concerned must be entered in box A, B, C1, C2, D, E, F or G of the RL-16 slip. For more information, see How to complete Schedule C or the Guide to Filing the RL-16 Slip: Trust Income (RL-16.G-V).

Designations of amounts as dividend tax credits, foreign income tax, income tax withheld from an income-averaging annuity for artists and donations allocated by a religious organization

If the trust designates income as taxable dividends from taxable Canadian corporations, it must then designate an amount as a dividend tax credit.

If the trust designates income as foreign income and it paid foreign income tax, it must designate an amount as foreign income tax.

If the trust designates income as income from an income-averaging annuity for artists, it must then designate an amount as income tax withheld.

The election made by a trust that is a religious organization to renounce the tax credit for donations and gifts in favour of certain of its members results in the designation of amounts as donations allocated by a religious organization.

Enter the designated amounts on the appropriate lines of Schedule C and the share of each beneficiary concerned in the appropriate boxes of the RL-16 slip. For example, enter:

• on line 414, the dividend tax credit (box J of the RL-16 slip);
• on line 415, the foreign income tax on business income (box K of the RL-16 slip);
• on line 416, the foreign income tax on non-business income (box L of the RL-16 slip);
• on lines 421 and 422, various foreign pension income (boxes B and D of the RL-16 slip);
• on line 418, the gifts allocated by a religious organization (box N of the RL-16 slip); and
• on line 428, the split income not reported elsewhere on the RL-16 slip (Box G of the RL-16 slip).

Designation of an amount as cost base adjustment of a capital interest

The designation of an amount as cost base adjustment of a capital interest applies only to trusts that are not personal trusts. The amount to be designated as a cost base adjustment of capital interests may be positive or negative.

A positive adjustment generally corresponds to capital distributions, non-taxable benefits granted to beneficiaries and amounts designated under subsections 104(13.1) and 104(13.2) of the federal Income Tax Act (see Income or taxable capital gain that was paid or that became payable in the year to a beneficiary but was reported by the trust). Each beneficiary's share in the adjustment (positive amount in box M of the RL-16 slip) must be used to reduce the adjusted cost base (ACB) of the beneficiary's capital interest in the trust.

A negative adjustment must be made by a mutual fund trust if, for example, it made an election under section 1121.1 of the Taxation Act. Each beneficiary's share in the adjustment (negative amount in box M of the RL-16 slip) must be used to increase the ACB of the beneficiary's units.

Sections 255(j.3), 257(n)(i.1), 651.1, 663, 666 to 668, 669.1, 669.2, 671 and 1121.3

7.4.1.2. Exceptions and limits

Whether the trust reports income for itself or allocates income to the beneficiaries, it must comply with the terms of the will or trust deed, while taking into account certain fiscal restrictions, such as the following:

1. A trust cannot allocate a loss to its beneficiaries, unless it is:
   • a net capital loss, in the case of an insurance segregated fund trust;
   • a loss sustained on transferred or loaned property or, in the case of a revocable or blind trust, a capital loss sustained on the disposition of the property.

Sections 467 and 851.16

2. A post-1971 spousal trust, an alter ego trust, a self-benefit trust or a joint spousal trust cannot deduct the portion of the allocated income referred to in points 1 and 2 under Allocations of amounts:
   • if that portion is considered to be derived from the income or taxable capital gain realized on property (capital property, land included in the inventory of a business, or Canadian or foreign resource property) further to:
     • the deemed sale of the property on the date of the spouse's death or, in the case of an alter ego trust or self-benefit trust, the settlor's death or, in the case of a joint spousal trust, the surviving spouse's death,
     • the transfer of property to another beneficiary, where the spouse, settlor or surviving spouse, as applicable, is still alive;
   • if that portion is allocated to another beneficiary provided the spouse, the settlor or the surviving spouse, as applicable, is alive throughout the year;
   • if, for the year in which the spouse, settlor or surviving spouse dies, that portion is allocated to another beneficiary and that portion exceeds the income that the trust earned after the death.

Sections 657(a)(i) to (iii)

3. A trust cannot deduct any allocated income referred to in points 1 and 2 under Allocations of amounts if the trust deed provides that a beneficiary may have a greater share of the trust's property than of its income. However, this restriction does not apply to a personal trust, an employee trust or a trust established under an employee benefit plan.

Section 657.2

4. A specified investment flow-through (SIFT) trust cannot deduct the non-deductible allocation amount. The amount deductible on line 81 of the return must not exceed the amount on line 173a of Schedule E.

Sections 657(a)(i) and (iv)

5. A trust cannot deduct the amount of interest or dividends it receives from an investment corporation that is owned by persons that are not resident in Canada if the trust holds all its property on behalf of its non-residents.
6. Since 2016, a trust to which property has been transferred in circumstances favoring the application of the rollover rule (as part of an eligible transfer or an eligible disposition) has not been able deduct the portion of the allocated income referred to in points 1 and 2 under Allocations of amounts for the taxation year during which the beneficiary dies.

Sections 454.2(b)(ii) and 692.5

7.4.2. Income or taxable capital gain that was paid or that became payable in the year to a beneficiary but was reported by the trust

Election referred to in sections 663.1 and 663.2 of the Taxation Act

If the trust was resident in Canada throughout the year, it may have filed with the Canada Revenue Agency (CRA), for that year, an election to make a designation of income pursuant to subsection 104(13.1) of the federal Income Tax Act or a designation of a taxable capital gain pursuant to subsection 104(13.2) of that Act.

If such an election is made, either section 663.1 or section 663.2 of the Taxation Act will apply to the calculation of the trust's income or taxable capital gain that was paid or that became payable to its beneficiaries during the year.

The income and capital gain concerned are not deemed paid nor to have become payable in the year to the beneficiaries. Consequently, these amounts must not be entered in Schedule C or on the RL-16 slips issued to the beneficiaries. As a rule, the amounts reduce the ACB of the beneficiaries' capital interest in the trust, unless the interest was acquired for no consideration and the trust was a personal trust.

Since the income designated pursuant to subsection 104(13.1) is not deducted on line 81 of the return, the trust can claim (on line 91) a non-capital loss from a previous year.

Similarly, since the capital gain designated pursuant to subsection 104(13.2) is not deducted on line 81 of the return, the trust can claim a net capital loss (line 92) or a non-capital loss (line 91). Regardless of the type of loss that is carried over, you must complete Part 3 of Schedule A or Part 2 of Schedule A.1 to calculate the net taxable capital gains that are designated for the year.

Since 2016, there have been limits to the elections that can be made under subsections 104(13.1) and 104(13.2) of the federal Income Tax Act, which allow the trust to designate, for a taxation year, a portion of its income that is not deemed paid and did not become payable to its beneficiaries. These designations can no longer be made if the trust's taxable income (taking into account the amounts of the designations) for the year is higher than zero.

Furthermore, if the beneficiary of an alter ego trust, a spousal trust, a joint spousal trust or a trust to which property has been transferred under circumstances that favor the application of the rollover rule dies during the year, no amount can be designated by the trust for a given year to any beneficiary other than the deceased beneficiary.

Complete Part 4 of Schedule C. Enclose a copy of all documents submitted to the CRA for the designations (for example, the trust's T3 return and the document showing the income covered by the designations under subsections 104(13.1) and 104(13.2)).

The deductible amount on line 81 must not exceed the result of the following calculation:

A – B, where

• A represents any income or taxable capital gain that the trust must allocate to the beneficiaries for Québec income tax purposes without the consequences of subsections 104(13.1) and 104(13.2);
• B represents the total of the designations under these subsections.

Section 663.2.1

Election referred to in section 688.1.1 of the Taxation Act

The trust can make the election referred to in section 688.1.1 of the Taxation Act to report as its own any taxable capital gain paid or payable during the year to its beneficiaries if the following conditions are met:

• the capital gain resulted from a transfer of property to one of its beneficiaries while the trust was resident in Canada;
• the transfer was made under the circumstances described in point 7 under Transfer of property at its FMV).

This election is made under paragraph 107(2.11)(a) or paragraph 107(2.11)(b) of the federal Income Tax Act. No such election can be made for Québec income tax purposes unless it is made with the CRA, in which case it is automatically deemed to be made. If the trust has filed this election with the CRA, you must send us proof that the election was made and written notification within 30 days after the date the election was made or after the filing deadline for the return, whichever is later.

7.4.3. Accumulating income allocated to a preferred beneficiary

When the trust files its federal income tax return for a given taxation year, it can make a joint election with a preferred beneficiary to have some or all of its accumulating income allocated to the beneficiary. In such a case, you must enter the lesser of the following amounts as income on the beneficiary's RL-16 slip:

• the amount that the trust elected to allocate and that is entered in the document submitted to the CRA;
• the allocated portion of the trust's accumulating income (see the explanations below under “Accumulating income”) calculated on the basis of the ratio between the amount covered by the election submitted to the CRA for the preferred beneficiary and the total amount covered by all the elections submitted to the CRA for the trust's preferred beneficiaries.

You can deduct on line 81 the total of the amounts entered on the preferred beneficiaries' RL-16 slips.

Check the box on line 4 of Schedule C. Enclose a copy of all documents that you submitted to the CRA for the election, such as:

• the note proving the election was made, signed by the trustee and the preferred beneficiary (or their tutor), and showing the amount allocated;
• the note showing the calculation of the preferred beneficiary's share in the accumulating income of the trust, signed by the trustee.

Accumulating income

The accumulating income of a trust corresponds to the trust's income for the year (line 80 of the return), minus the total of the allocated income referred to in points 1, 2, 3 and 5 under Allocations of amounts. Certain amounts must then be subtracted from the result obtained, such as:

• in the case of a spousal trust, an alter ego trust or a joint spousal trust, all income (or losses) and all capital gains (or capital losses) resulting from:
  • the deemed sale of property (capital property, land included in the inventory of a business, or Canadian or foreign resource property) upon the death of the spouse, the death of the individual whose death results in the deemed sale (in the case of an alter ego trust) or the death of the surviving spouse (in the case of a joint spousal trust), or
  • the transfer of such property to a beneficiary other than the spouse during the spouse's lifetime;
• amounts from a net income stabilization account (NISA) Fund No. 2, except those received by a spousal trust during the spouse's lifetime;
• in the case of a testamentary spousal trust where the beneficiary spouse died in the year, the amount deemed paid to the trust regarding the balance (determined on the date of death) of a NISA Fund No. 2.

Sections 657(b) and 658 to 659.1

7.5. Schedule D – Carry-Back of a Loss 

The trust may have sustained, in a taxation year, one or several types of losses, including:

• a non-capital loss;
• a farm loss or a fishing loss;
• a net capital loss;
• a net loss on precious property;
• a restricted farm loss.

The losses listed above can be carried back three years and forward a certain number of years, depending on the type of loss. At the end of the tenth year that follows the year in which the trust sustained a business investment loss (line 511), the amount of that loss or the unused portion of a non-capital loss, whichever is less, will become a net capital loss at that time.

Schedule D must be completed in order to carry a loss back to a previous year; it must be filed with the trust income tax return. You can also use Schedule D to determine the trust's non-capital loss for the year concerned.

In the upper right-hand corner of the schedule, you must enter the end date of the taxation year in which the loss was sustained (“taxation year concerned”). You can use Schedule D to carry back a loss sustained in 2024 or 2025. Make sure you enter the end date(s) of the taxation year(s) to which the loss is being carried (one or more of the three previous taxation years).

The carry-back of a non-capital loss has no incidence in the year to which the loss is carried (year of the carry-back) with respect to the amounts already allocated to the beneficiaries.

However, the carry-back of a net capital loss may have the following consequences in the year of the carry-back:

• The carry-back of the loss reduces the taxable capital gains of the trust. The result obtained constitutes taxable capital gains that could be designated, up to the amount on line 80 of the return. If the result (amount from line 250 of Schedule A that you amended to take into account the carry-back of the loss) is less than the amount of taxable capital gains already designated (line 250 of Schedule A before the carry-back of the loss), you must file an amended Schedule C and amended RL-16 slips to reduce the taxable capital gains designated. You must ensure that the total income allocated to the beneficiaries remains unchanged.
• The carry-back of the loss may increase the amount on line 355 (other adjustment of investment expenses) of Schedule B for that year, because it must be entered on line 338 of that schedule.
• The carry-back of the loss may create or increase a non-capital loss for that year.

The income tax refund resulting from the carry-back of a loss may be applied to the payment of an amount owed for another taxation year.

A net capital loss on precious property can be used only to reduce a capital gain realized on other precious property. Similarly, a restricted farm loss that is carried over to a given year can be used only to reduce farm income for that year. In all cases, the loss must be carried back in accordance with sections 727 to 737 of the Taxation Act or, in the case of precious property, in accordance with sections 265 to 269.

In this schedule and in its instructions, the term “beneficiary” means any person to whom the trust must allocate income or a taxable capital gain. This person can be a beneficiary that holds an interest in the trust, a transferor to which the income attribution rule applies or the electing contributor of a deemed resident trust.

7.6. Schedule E – Income Tax on the Taxable Distributions Amount and Calculation of Eligible Dividends to Be Designated

Complete Schedule E if the trust is a specified investment flow-through trust.

The following amounts must be the same:

• the amount in column 4 on line 402a of Schedule C and the amount on line 185 of Schedule E;
• the amount on line 410 of Schedule C and the amount on line 170 of Schedule E.

Sections 657, 663.4, and 1129.70 and the following

7.7. Schedule F – Income Tax Payable by a Specified Trust for a Specified Immovable 

Complete Schedule F if the trust is a specified trust that held a specified immovable or was a member of a partnership that held such an immovable.

If the trust did not earn income from other sources in Québec, you must complete only lines 1 through 11 and Part 7 of the return 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.

If the trust earned taxable income from other sources in Québec (such as business income), enter the income on the return and calculate the income tax payable on that income in the usual way. Also complete Schedule F. For example, if the trust earned rental income from a specified immovable and business income related to the rental of another immovable located in Québec, you must:

• complete Schedule F to calculate the rental income from the specified immovable and the related income tax payable, and enter the income tax amount on line 138 of the return;
• enter the net rental income from the other immovable on line 55 of the return and complete the rest of the return.

How to complete Schedule F

Provide the requested information in parts 1 through 4, then complete parts 5 and 6 to calculate the net rental income and Part 7 to calculate the income tax payable.

Note that you must complete, for each specified immovable, a separate copy of Schedule F and of the capital cost allowance table on page 3 of the schedule. However, complete Part 6 only once to report all the rental income from specified immovables (including the income allocated by a partnership).

Line 604 – Portion of the immovable used by a beneficiary of the trust or a co-owner for personal purposes

Enter on line 604 the percentage of the immovable that a beneficiary of the trust or a co-owner, as applicable, used for personal purposes.

Lines 611 to 620 – Portion of the expenses not attributable to the rental (column B)

Enter, on each of lines 611 through 620 in column B, the amount that corresponds to the portion of the total expenses related to the personal use of the immovable by the beneficiary of the trust or by the co-owner, as applicable.

The amount entered may be the same as the result obtained by multiplying the amount of total expenses entered in column A by the percentage on line 604. The amount may also be “0” in certain cases (for example, where the expenses are entirely associated with the rental of the immovable).

Line 663 – Capital cost allowance (CCA)

An accelerated investment incentive was introduced to enable a trust to obtain an increased additional deduction with respect to property acquired for the taxation year in which the property becomes available for use. Some property acquired after December 3, 2018, can thus benefit from the additional 30% CCA.

Property acquired after December 3, 2018, that is qualified intellectual property or general-purpose electronic data processing equipment can, under certain conditions, give entitlement to an accelerated CCA corresponding to the full acquisition cost in the year it became available for use.

Note that the additional 30% CCA has been abolished and, as of 2024, does not apply to property acquired after December 31, 2023. However, it will continue to apply to such property for the remainder of the period applicable to the property, provided that the property meets the requirements and was acquired by December 31, 2023.

Accelerated CCA for qualified intellectual property or general-purpose electronic data processing equipment

A trust can deduct the full acquisition cost of property that is qualified intellectual property or general-purpose electronic data processing equipment for the taxation year in which the property became available for use.

General-purpose electronic data processing equipment is property included in class 50 of Schedule B to the Regulation respecting the Taxation Act. To qualify for accelerated CCA, it must be used primarily in Québec in the course of carrying on a business, and put into use before 2024.

Property that is not considered qualified intellectual property or that is computer equipment that is accelerated investment incentive property (AIIP), but that does not meet the above requirements, can qualify for the CCA rules applicable to such property.

Additional 30% CCA

Some property can benefit from the additional 30% CCA. Consequently, a trust can deduct from its business income for a taxation year an amount corresponding to 30% of the CCA deducted from its income for the previous taxation year with respect to the following property, if the trust acquired the property after December 3, 2018:

• machinery or equipment used in manufacturing or processing, namely property included in class 53 of Schedule B to the Regulation respecting the Taxation Act;
• clean energy generation equipment, namely property included in class 43.1 of the schedule or property included in class 43.2 of the schedule;
• general-purpose electronic data processing equipment and systems software for that equipment, namely property included in class 50 of the schedule, other than property that had allowed or could have allowed the taxpayer to claim the additional capital cost allowance of 60%, provided the property is:
  • new at the time of its acquisition,
  • used within a reasonable time after its acquisition,
  • used primarily in Québec in the course of carrying on a business for a period of at least 730 consecutive days after the property's use began;
• qualified intellectual property.

Note that the additional 30% CCA has been abolished and, as of 2024, does not apply to property acquired after December 31, 2023. However, it will continue to apply to such property for the remainder of the period applicable to the property, provided that the property meets the requirements and was acquired by December 31, 2023.

Instructions for completing the CCA table

The instructions below can be used to complete both Schedule F and form TP-128.F-V, Income Earned by a Trust from the Rental of Immovable Property.

Cost of acquisitions and additions made during the taxation year (column 3)

Enter the cost of acquisitions and additions made to the specified immovable during the taxation year concerned. If property was transferred to the trust by way of an inter vivos gift, enter the fair market value of the property at the time of transfer.

In the case of property held in co-ownership, enter the amount that corresponds to the trust's percentage interest in the immovable.

Cost of acquisitions in column 3 that are AIIP (column 3.1)

Use column 3.1 only for AIIP acquired after November 20, 2018, that became available for use during the taxation year.

Amount respecting dispositions made during the taxation year (column 4)

For each property of a prescribed class that was disposed of in the taxation year, determine the lesser of the following two amounts:

• the proceeds of disposition of the property (after subtracting the expenses incurred for the disposition);
• the capital cost of the property.

In the case of property held in co-ownership, enter the amount that corresponds to the trust's percentage interest in the immovable.

Do the same calculation for all the property of a prescribed class that was disposed of. Add the amounts determined and enter the result in column 4.

See Distribution of property by a personal trust for information about the rules that apply to the transfer of property by a personal trust to its beneficiaries.

UCC before a reduction for new property (column 5)

A negative result entered in column 5 corresponds to a recapture of capital cost allowance. If one or more immovables remain in the class at the end of the taxation year, enter “0” in column 10.

A positive result corresponds to a terminal loss if there are no immovables remaining in the class at the end of the taxation year.

Proceeds of dispositions that can reduce the capital cost of AIIP acquired in the taxation year (column 5.1)

Use column 5.1 only for AIIP acquired after November 20, 2018, that became available for use during the taxation year.

UCC adjustment based on AIIP acquired in the taxation year (column 5.2)

Use column 5.2 only for AIIP acquired after November 20, 2018, that became available for use during the taxation year. 

To calculate the amount in column 5.2 for AIIP available for use in 2024 or before, use the applicable variable from the table below. 

Note that the straight-line depreciation method is used for property in classes 12, 13, 14 and 15. For those classes, enter the amount of CCA you are claiming directly in column 9.

Reduction (column 6)

Do not make adjustments in column 6 for property acquired from a person with whom the trust was not dealing at arm's length, if the property was depreciable property of the person continuously for at least 364 days immediately before the trust acquired it.

Take into account, in the calculation of the reduction, the amount from column 3.1 for AIIP acquired after November 20, 2018, that became available for use during the taxation year.

Base amount for CCA calculation (column 7)

For column 7, take into account the amount from column 5.2 only for AIIP acquired after November 20, 2018, that became available for use during the taxation year.

Capital cost allowance (column 9)

Enter in column 9 the amount of capital cost allowance that the trust is deducting. The amount cannot be greater than the result that is obtained when the amount in column 7 is multiplied by the rate in column 8.

For more information about AIIP, see guide IN-155-V, Business and Professional Income.