Trust reporting requirements
Key amendments – Filing exceptions in subsection 150(1.2)
Current legislation | Proposed amendments | |
| Paragraph 150(1.2)(b) | Holds assets with a total fair market value not exceeding $50,000 throughout the year, if the only assets held by the trust throughout the year are one or more of: (i) money, (ii) a debt obligation described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3), (iii) a share, debt obligation or right listed on a designated stock exchange, (iv) a share of the capital stock of a mutual fund corporation, (v) a unit of a mutual fund trust, (vi) an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), and (vii) an interest as a beneficiary under a trust, all units of which are listed on a designated stock exchange | Remove restriction on assets owned by the trust |
| Paragraph 150(1.2)(b.1) | N/A | Extends current Paragraph 150(1.2)(b) by increasing the limit on the fair value of property held to $250,000, and broadening the specific assets the trust can hold. |
| Paragraph 150(1.2)(c) | Is required under the relevant rules of professional conduct or laws of Canada or a province to hold funds for the purposes of the activity regulated under those rules or laws, provided the trust is not maintained as a separate trust for a particular client or clients; | Extend this exception to specific accounts provided the only assets held by the trust throughout the year are money with a value not exceeding $250,000. |
| Paragraph 150(1.2)(q) | N/A | Subsection would not apply to statutorily created trust relationships, such as those of bankruptcy trustees or provincial guardians. |
Exceptions in subsection 150(1.2) and the amendments regarding bare trusts will be applicable for taxation years ending on Dec. 31, 2024.
Bare trust key amendments
Under current legislation, subsection 150(1.3) of the Income Tax Act deems certain arrangements, such as bare trusts, to be trusts for reporting purposes. The amendments proposed will repeal the existing language and replace it with new language that defines what is a “bare trust” for beneficial ownership reporting. This amendment, including removing references to Section 150 in subsection 104(1), removes the filing requirement unless they are deemed to be a trust under new subsection 150(1.3).
New subsection 150(1.31) lists exceptions to the application of subsection 150(1.3), including:
- Arrangements whereby all deemed beneficiaries are also legal owners.
- Each legal owner is a member of a partnership (other than a limited partner) holding property for the sole use by, or benefit of, the partnership, and any member of the partnership is required to file an information return for the partnership for the taxation year.
- Real property is held as a principal residence by related persons.
- Property held under a court order or by non-profit organizations for government-funded purposes.
The existing subsection 150(1.3) will be repealed for tax years ending after Dec. 30, 2024, and the amended subsection 150(1.3) and the introduction of subsection 150(1.31) apply to taxation years ending after Dec. 30, 2025.
Post-mortem tax planning – Subsection 164(6) loss carry back
Subsection 164(6) allows a deceased taxpayer’s legal representative to elect to treat certain capital losses and terminal losses of the taxpayer’s graduated rate estate for its first taxation year as losses of the taxpayer for the taxpayer’s last taxation year.
First, the period for which the election can be made is extended to allow the taxpayer’s legal representative to treat capital losses and terminal losses realized by the graduated rate estate in its first three taxation years as losses of the taxpayer for the taxpayer’s last taxation year. This amendment is intended to align the treatment of capital losses and terminal losses realized by a graduated rate estate with the treatment of net capital losses and non-capital losses realized by other taxpayers.
Second, the requirement to file an amended return of income for the taxpayer’s last taxation year is modified to a requirement to file a prescribed form amending the return of income of the deceased taxpayer for the taxpayer’s last taxation year.
A parallel amendment has been made to subsection 164(6.1) for employees’ options.
Shareholder debt
Certain debtors are excluded from the application of subsection 15(2), including a corporation resident in Canada (“CRIC”) and a partnership, each member of which is a CRIC. Subsection 15(2) is amended to relocate these exclusions to new subsection 15(2.01), following the addition of a new exception for tiered partnerships in new paragraph 15(2.01)(b).
New subsection 15(2.01) is established to compile a list of debtors to which subsection 15(2) does not apply. These debtors are:
- CRICs
- Partnerships, each member of which is either a CRIC, or another partnership described here (to accommodate tiered-partnership structures).
Consequently, subsection 15(2) will not apply to a partnership if all members are, directly or indirectly (through one or more other partnerships), CRICs.
Contact your Baker Tilly advisor to learn more about how we can help you navigate the complexities of the Canadian tax system.
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