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Published | Categories : Income tax - individuals, Better tax practices – individuals

Tax Consequences of a Death

If you are the liquidator of a succession (estate), you may have to file an income tax return for the succession. To understand the tax consequences of the deemed sale of capital property immediately before the person's death, refer to the Guide to Filing the Income Tax Return of a Deceased Person (IN-117-V).

The circumstances described below should be considered when preparing a succession's income tax return. The term "trust" means any type of trust or any succession.

Residence of a trust

Revenu Québec may consider that the residence of a trust is not the same as the residence of its trustee where the trustee is resident outside Québec. The residence of a trust is considered to be in Québec if the facts show that a person resident in Québec is responsible for a substantial portion of the management and control of the trust's property, even where that person is not a trustee of the trust. A trustee who is resident or deemed to be resident in Québec must file an income tax return. For more information, see the Guide to Filing the Trust Income Tax Return (TP-646.G-V).

Deemed sale every 21 years

A trust is considered to have sold its property every 21 years, on the same date as that of the first deemed sale of its property, which, generally speaking, is the anniversary of its creation. For that year, the trust must report any income or losses, and any capital gains or losses. Form TP-653-V, Deemed Sale Applicable to Certain Trusts, must be used to calculate the amounts to be reported.

Split income of a beneficiary who is a minor

Effective March 22, 2011, any capital gain allocated to a beneficiary who is a minor following a sale of shares to a person not dealing at arm's length with the minor is considered a taxable dividend other than an eligible dividend.

Note that Revenu Québec conducts audits to ensure that income from trusts is reported in accordance with the Taxation Act.

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