T3 Trust Guide – 2023

T4013(E) Rev. 23

The CRA's publications and personalized correspondence are available in braille, large print, e-text, and MP3. For more information, go to Order alternate formats for persons with disabilities or call 1-800-959-8281.

If you are outside Canada and the United States, call 613-940-8495. The CRA only accepts collect calls made through a telephone operator. After your call is accepted by an automated response, you may hear a beep and notice a normal connection delay. This service operates in Eastern Standard Time and is open Monday to Friday from 8:00 am to 8:00 pm and Saturday from 9:00 am to 5:00 pm.

La version française de cette publication est intitulée T4013, T3 – Guide des fiducies.

Table of contents

• Before you start
• Definitions
• The meaning of certain terms
• Chapter 1 – General information
  • Types of trusts 
  • Code number for the type of trust
  • Who should file ▲ 
  • Rules for tax years ending on or after December 31, 2023
  • When must beneficial ownership information be submitted
  • Trust account number
  • What to file ▲
  • Form T3-DD, Direct Deposit Request for T3
  • When to file ▲ 
  • Tax year-end and fiscal period
  • How to file the T3 return ▲
    • If the trust resides in:
  • Penalties and interest ▲
    • Penalties
  • Payment options
  • After you file ▲
• Chapter 2 – Completing the T3 return
  • Step 1 – Identification and other required information ▲
  • What to file - Instructions for bare trusts
  • Step 2 – Calculating total income: Lines 1 to 12
  • Thin capitalization – Rules for trusts
  • Step 3 – Calculating net income: Lines 13 to 31
  • Step 4 – Calculating taxable income: Lines 32 to 43
  • Step 5 – Summary of tax and credits: Lines 44 to 73
• Chapter 3 – Trust schedules and forms
  • Schedule 1 – Dispositions of Capital Property
    
    • Form T1055, Summary of Deemed Dispositions (2002 and later tax years)
    • Form T2223, Election Under Subsection 159(6.1) of the Income Tax Act, by a Trust to Defer Payment of Income Tax
  • Schedule 8 – Investment Income, Carrying Charges, and Gross-up Amount of Dividends Retained by the Trust ▲
  • Schedule 9 – Income Allocations and Designations to Beneficiaries ▲
    
    • Line 930 – Taxable capital gains eligible for deduction
  • Schedule 10 – Part XII.2 Tax and Part XIII Non-Resident Withholding Tax
  • Schedule 11 – Federal Income Tax
  • Schedule 11A – Donations and gifts tax credit calculation
  • Schedule 12 – Minimum Tax
  • Provincial and territorial income tax ▲
  • Schedule 15 – Beneficial Ownership Information of a Trust
    • Identifying Beneficiaries
• Chapter 4 – T3 slip and T3 summary
  • How to file the T3 slip and T3 summary ▲
    • Electronic filing methods
  • Distributing the T3 slip
  • Amending, cancelling, adding, or replacing T3 slips
  • Recipient identification number ▲
  • How to complete the T3 slip ▲
• Appendix A – T3 slip and T3 summary ▲
• Digital services
  • Submitting and filing documents online related to T3
    • Documents you can file through EFILE
• For more information
  • Taxpayer Bill of Rights
  • If you need help
  • Direct deposit
  • Forms and publications
  • Getting information by telephone
  • Teletypewriter (TTY) users
  • Giving or cancelling an authorization
  • CRA service feedback program
• Index

Find out if this guide is for you

A T3 Trust Income Tax and Information Return (T3 return) is both a return of income and a general information return.    A T3 trust return serves to report not only information about the reporting trust, but also additional information, such as that affecting the taxation of persons (for example, beneficiaries or settlors) having some connection to the trust.

This guide provides information on how to complete the T3 return, the T3 slip, Statement of Trust Income Allocations and Designations, and the T3SUM Summary of Trust Income Allocations and Designations.

Use this guide if you are filing a T3 return for either a testamentary trust or an inter vivos trust. For more information, see Types of trusts.

The word "you" throughout the guide refers to the trustee, executor, administrator, liquidator, or anyone preparing the T3 return for a trust. For tax purposes, estates and trusts are treated similarly. In calculating the income of an estate, references in this guide to a trust or trust property include "estate" or "estate property".

The "Act" refers to the Income Tax Act. Unless otherwise stated, all legislative references within this guide are to the Income Tax Act and the Income Tax Regulations. You can find a list of these references in the Index at the end of the guide.

For a list of Income Tax Act references, go to Justice Laws.

For a list of Income Tax regulations references, go Consolidated Regulations.

If you need more information after reading this guide, visit Taxes, or call 1-800-959-8281

What's new for 2023

We list the service enhancements and major changes below, including announced income tax changes that are not yet law at the time this guide was published. If they become law as proposed, they will be effective for 2023 or as of the dates given. For more information about these changes, see the areas outlined in colour in this guide.

Requirement to file a T3 Return, and T3 Schedule 15 – Beneficial Ownership Information of a Trust

The rules governing which trusts must file an annual T3 return have changed. Express trusts (or for civil law purposes a trust other than a trust that is established by law or by judgement) resident in Canada that did not have to file a return in prior years may be required to file for tax years ending on or after December 31, 2023. See "Who should file". 

As announced in Budget 2018, to improve the collection of beneficial ownership information with respect to trusts, trusts will have to provide additional information on an annual basis. This new reporting requirement is applicable to tax years ending on or after December 31, 2023. All trusts (resident and non-resident) that are required to file a T3 return, other than "listed trusts", generally must report beneficial ownership information on Schedule 15.

Trust described as “bare trusts” are subject to the new trust reporting requirements.

For more information, see the description "Bare Trust" in Chart 1. “Who should file”, “What to file – bare trusts”, “Questions 13 and 14”, and “Schedule 15 – Beneficial Ownership Information of a Trust”. A penalty may apply for a failure to comply with these new reporting requirements – see Penalties .

Filing of trust-related information returns (T3 Slips)

Effective January 1, 2024, the threshold for mandatory electronic filing of income tax information returns for a calendar year is lowered from 50 to 5. See information on filing the T3 Summary and T3 slips electronically using Internet file transfer or Web forms, and information on Failure to file electronically.

Filing a Trust Return Through EFILE

Effective for the 2023 tax year, you can file the following returns through EFILE:

• T3D, Income Tax Return for Deferred Profit Sharing Plan (DPSP) or Revoked DPSP
• T3P, Employees’ Pension Plan Income Tax Return
• T3RI, Registered Investment Income Tax Return
• T3GR, Group Income Tax and Information Return for RRSP, RRIF, RESP, or RDSP Trusts
• T1061, Canadian Amateur Athletic Trust Group Information Return
• T3PRP, T3 Pooled Registered Pension Plan Tax Return
• T2000, Calculation of Tax on Agreements to Acquire Shares (Section 207.1(5) of the Income Tax Act)
• T3ATH-IND, Amateur Athlete Trust Income Tax Return
• T3RET, T3 Trust Income Tax and Information Return
• T3S, Supplementary Unemployment Benefit Plan Income Tax Return
• T3M, Environmental Trust Income Tax Return
• Section 216 Returns

For more information, see Documents you can file through EFILE.

Electronic Filing by Tax Preparers

Starting on January 1, 2024 a person or partnership is a tax preparer for a calendar year if, in the year, they accept consideration to prepare more than five returns of income of estates or trusts. An employee who prepares returns of income in the course of performing their duties of employment is not considered a tax preparer. Subsection 150.1(2.3) requires tax preparers to electronically file any return of income that they prepare for consideration; except that five of the returns of trusts or estates may be filed by other means. A tax preparer who fails to electronically file a return of income for a trust or estate may be subject to a $25 penalty for each failure.

First home savings account (FHSA)

The first home savings account (FHSA) is a new registered plan to help individuals save for their first home. An FHSA can be opened starting April 1, 2023.

If an FHSA holder has died during the year, there may be FHSA implications for their estate. For more information, go to First Home Saving Account (FHSA).

Property flipping

Starting January 1, 2023, any gain from the disposition of a housing unit (including a rental property) located in Canada, or a right to acquire a housing unit, located in Canada or a right to acquire a housing unit, located in Canada that the trust owned or held for less than 365 consecutive days before its disposition is deemed to be business income and not a capital gain. The deeming rule does not apply to inventory, as the disposition would result in business income.

Very generally, exceptions to the flipped property rule may apply in certain situations where the disposition occurs due to, or in anticipation of, certain life events.

For more information about property flipping and the life event exceptions, go to Residential Property Flipping Rule or see T4037 Capital Gains Guide.

Electronic remittances or payments above $10,000

As of January 1, 2024, remittances or payments to the Receiver General of Canada should be made as an electronic payment if the amount is more than $10,000. Payers may face a penalty, unless they cannot reasonably remit or pay the amount electronically. For more information, go to Payments to the CRA.

British Columbia clean building tax credit (Extended to 2027)

The clean buildings tax credit is a refundable income tax credit for qualifying retrofits that improve the energy efficiency of eligible commercial and multi-unit residential buildings with four or more units. The retrofit must improve the energy efficiency of an eligible building and meet energy-use targets. The credit amount is 5 percent of qualifying expenditures paid on the retrofit.

Claim this credit on line 65 of the T3 Return. For more information, see British Columbia clean building tax credit (Extended to 2027).

Return of Fuel Charge Proceeds to Farmers Tax Credit - NS, PE, NL & NB

On November 22, 2022, Environment and Climate Change Canada announced that the fuel charge program will expand to include Nova Scotia, Newfoundland and Labrador, Prince Edward Island and New Brunswick beginning July 1, 2023.

For more information, see Return of fuel charge proceeds to farmers tax credit.

Yukon mining carbon price rebate

The mining carbon price rebate is a refundable credit for qualifying clean technology assets that reduce fossil fuel consumption.

Claim this credit on line 68 of the T3 Return. For more information, see Yukon mining carbon price rebate.

Clean Technology Investment Tax Credit

As of the date of Royal Assent, the new Clean Technology Investment Tax Credit (ITC), available for eligible property as of March 28, 2023, can be claimed by a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust. There is no specific line on the return for the Clean Technology ITC, therefore if the trust is eligible to claim the credit in the current tax year, enter the amount on line 51 of the T3 return.

Before you start

Find out if you need to read the whole guide

If you are filing a T3 return for an estate that has only pension income, investment income, or death benefits, you do not need to read the entire guide. Use the ▲ to find the information you may need. This symbol appears in the table of contents, in the right margins of the guide, and in the left margins of the return beside the lines that may relate to your situation. 

Before you begin, be sure to read:

• Chapter 1 – General information
• Step 1 – Identification and other required information
• Chapter 4 – T3 slip and T3 summary

Determine the residence of the trust or estate

A trust may be either factually resident, non-resident or deemed to be resident in Canada. To assist in making this determination see Income Tax Folio S6-F1-C1, Residence of a Trust or Estate.

Non-resident trusts or deemed resident trusts

If you are the trustee for a non-resident trust, or a deemed resident trust, special rules apply in some situations. Not all of these rules are covered in this guide. For more information, call one of the phone numbers listed under "Non residents and deemed resident trusts".

Which tax package should you use?

Use the provincial or territorial forms package for the province or territory where the trust was resident on the last day of its tax year.

To get any schedules and forms that you may need, go to Canada Revenue Agency forms listed by number, or call 1-800-959-8281. After you have completed the necessary schedules, forms, and statements, you will be ready to complete the T3 return. If you are filing a paper return, send us all required documents with the return.

For more information, go to Doing taxes for someone who died.

Did you know that?

The Canada Revenue Agency may apply a penalty if an information return (T3 slip) is missing the required recipient identification number. For more information, see Recipient identification number.

Definitions

In this section, we define the technical terms we use in this guide.

Administrator – A person appointed by a court to settle the estate of a deceased person, generally in situations where an individual dies without a will or a testator’s will does not name an executor.

Allocate, allocation – To assign or set apart income from a trust to a beneficiary. An amount can only be allocated to a beneficiary when one of the following applies:

• the beneficiary is entitled to the income in the year that it is earned by the trust, under the trust document
• the trust makes a preferred beneficiary election to include the trust income in the beneficiary’s income
• the beneficiary is paid income in the year that it is earned by the trust, at the discretion of the trustee

In most cases, the amounts you allocate have to be included in the beneficiary’s income, and they are deducted from the trust’s income. For exceptions to this general rule, see “Exceptions and limits to income allocations”.

Arm’s length – This refers to a relationship or a transaction between persons who act in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

“Related persons” are not considered to deal with each other at arm’s length. Related persons include:

• Individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact).
• A corporation and a shareholder who controls the corporation

“Unrelated persons” may not be dealing with each other at arm’s length at a particular time. Each case will depend upon its own facts.

Generally, a taxpayer and a personal trust (other than a specified trust described in “Chart 1 – Types of Trusts”) are deemed not to deal with each other at arm’s length if the taxpayer, or any person not dealing at arm’s length with the taxpayer would be beneficially interested in the trust.

It is a question of fact whether unrelated persons (other than a taxpayer and a personal trust) are dealing with each other at arm’s length at a particular time. This could include situations involving unrelated individuals, trusts, partnerships or corporations. General criteria can be provided to determine whether there is an arm’s length relationship between unrelated persons for a given transaction. However, each particular transaction or series of transactions must be examined on its own merits.

The following criteria have generally been used by the courts in determining whether parties to a transaction are not dealing at arm’s length:

• Whether there is a common mind which directs the bargaining for both parties to a transaction.
• Whether the parties to a transaction act in concert without separate interests. The fact that two or more parties act in a highly interdependent manner (in respect of a transaction of mutual interest) can be an indication of the fact that the parties are acting in concert and in the same interest and therefore are not dealing with each other at arm’s length.
• Whether there is de facto control.

In any particular case, any one or more of the criteria may be of greater or lesser importance in the determination whether the parties are dealing at arm’s length.

For more information in respect of “Arm’s length”, “Related persons” and “Unrelated persons”, see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.

Beneficiary – This includes the person for whose benefit a trust is created, the person to whom the amount of an insurance policy or annuity is payable, or the unit holder of a mutual fund trust.

For the purposes of the trust reporting requirements, see “Identifying Beneficiaries”.

Controlling persons – for purposes of the new trust reporting requirements, the term controlling person is described under “Schedule 15 – Beneficial Ownership Information of a Trust”.

Common Law Partner – This refers to a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. They:

 a) This person has been living with you in such a relationship for at least 12 continuous months

Note         

In this definition, 12 continuous months includes any period you were separated for less than 90 days because of a breakdown in the relationship.

 b) This person is the parent of your child by birth or adoption

 c) This person has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person  for support

Contribution of property – This generally refers to a transfer or loan of property, other than an arm’s length transfer [as defined in subsection 94(1)] to a non-resident trust by a person or partnership. A contribution is also considered to have been made by a person or partnership where they make (or become obligated to make) a particular transfer (other than an arm’s length transfer) as part of a series of transactions or events that includes another transfer or loan (other than an “arm’s length transfer”), to the trust, by another person or partnership.

In these circumstances, the other transfer or loan is considered to be a contribution to the trust by the person or partnership only to the extent that the other transfer or loan can reasonably be considered to have been made for the particular transfer or loan, or the obligation to make the particular transfer or loan.

Deemed disposition – This term is used when you are considered to have disposed of property, even though you did not actually sell it.

Designate, designation – This is done to keep the identity of certain types of allocated income or credits. In this way, the beneficiaries can take advantage of deductions or credits that relate directly to the type of income, such as a dividend tax credit or pension income amount. Generally, you report amounts designated to a beneficiary in the appropriate box on a T3 slip.

Distribute, distribution – This refers to the division of trust property among the beneficiaries according to the terms of a trust document, or according to the applicable law.

Electing beneficiary – For a tax year of a qualified disability trust, this means an individual named as a beneficiary by the particular individual (that is the deceased individual) in the instrument under which the trust was created, and who meets all of the following conditions:

• includes in their return of income for the trust year, an election made jointly with the trust, that the trust will be a qualified disability trust for the trust year
• must be eligible for the disability tax credit for the beneficiary’s tax year in which the trust’s year-ends
• does not elect with any other trust to be a qualified disability trust for the other trust’s tax year that ends in the beneficiary’s tax year

Executor – An individual or trust institution appointed by a testator (named in their will) to administer their estate. The executor may be confirmed by a court. See the definition of “Testator” .

Exempt property – This is trust property that, if disposed of, any income or capital gain resulting from the disposition is exempt from Canadian tax, either because the trust is not resident in Canada, or because of a tax treaty.

Express trust – A trust generally created with the settlor’s express intent, usually made in writing (as opposed to a resulting or constructive trust, or certain trusts deemed to arise under the provision of a statute).

Gift – This is generally a voluntary transfer of property (including money) without valuable consideration. However, a transfer of property where the donor receives an advantage is still considered a gift as long as the advantage does not exceed 80% of the fair market value (FMV) of the transferred property, or the Canada Revenue Agency is satisfied the property was transferred with the intention of making a gift.

Generally, the eligible amount of a gift or monetary contribution is the amount by which the fair market value of the gifted property exceeds the amount of the advantage, if any, received or receivable for the gift. There may be situations where the eligible amount may be deemed to be nil or the fair market value may be deemed to be less than the actual fair market value. For more information, see Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

The advantage is generally the total value of any property, service, compensation, use, or any other benefit that the trust, or a person not dealing at arm’s length with the trust, is entitled to as partial consideration for, in gratitude for, or in any other way related to the gift. The advantage may be contingent or receivable in the future.

Legal representative – An individual or organization appointed by a legal document (for example, testator’s will or court order). Includes: administrator, executor, liquidator, and trustee.

Liquidator – In Quebec, the liquidator is responsible for distributing the assets of all estates established after December 31, 1993. For estates with a will, the liquidator’s role is similar to an executor’s. For estates without a will, the liquidator acts as the administrator of the estate.

Listed trust – Refers to the situations or trust types provided in paragraphs 150(1.2)(a) to (o) of the Act. For more information see “Listed Trusts” under “Who should file”.

Preferred beneficiary – A person resident in Canada who is a beneficiary under the trust at the end of the year, and who meets one of the following conditions:

• they qualify for the disability amount for the tax year that ends in the trust’s tax year
• they:
  • are 18 years of age or older before the end of the tax year
  • are a dependant of another individual for the tax year because of a mental or physical impairment
  • have income for the tax year, not including income from a preferred beneficiary election, which does not exceed the maximum basic personal amount

In addition, they must be one of the following:

• the settlor of the trust (see the definition of “settlor”)
• the spouse or common law partner, or former spouse or common law partner, of the settlor of the trust
• a child, grandchild, or great grandchild of the settlor of the trust
• the spouse or common law partner of a child, grandchild, or great grandchild of the settlor of the trust

Principal residence – Generally means any of the following:

• a housing unit
• a leasehold interest in a housing unit
• a share of a co operative housing corporation, if the share is acquired for the sole purpose of obtaining the right to live in a housing unit owned by that corporation

• the individual is, in the year, any of

(i) the settlor of the trust,

(ii) the child, grandchild, great grandchild, parent, grandparent, great grandparent, brother, sister, uncle, aunt, niece or nephew of the settlor or of the spouse or common-law partner or former spouse or common-law partner of the settlor,

(iii) the spouse or common-law partner or former spouse or common-law partner of any person described in (i) or (ii) above

• the individual is resident in Canada during the year
• the individual is eligible for the disability tax credit

Settlor – Generally, this means the person who set up a trust by contributing property to the trust. In the case of a preferred beneficiary election, a settlor is restricted to a person who is otherwise the settlor of the trust and has contributed the majority of property to the trust. See “Schedule 15 – Beneficial Ownership Information of a Trust” for further information in respect of the meaning of “settlor” for the purposes of the trust reporting requirements.

Spouse – This applies only to a person to whom you are legally married.

Testator – This is the deceased person who made and left a valid will.

Trust – A binding obligation enforceable by law when undertaken. It may be created by one of the following:

• a person (either verbally or in writing)
• a court order
• a statute

Generally, a trust is created when it is properly established and there is certainty of:

• the intent to create a trust
• the property to be placed in trust
• the beneficiaries of the trust

Note

For purposes of the requirement to provide beneficial ownership information on Schedule 15, a trust includes an arrangement under which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property. These arrangements are generally known as “bare trusts”. See “Schedule 15 – Beneficial Ownership Information of a Trust”.

Trustee – An individual or trust institution that holds legal title to property in trust for the benefit of the trust beneficiaries. The trustee includes an executor, administrator, assignee, receiver, or liquidator who owns or controls property for some other person.

Vested interest – An immediate fixed interest in property, although the right of possession and enjoyment may be postponed.

Will – A legally enforceable document that declares the intentions about disposal and administration of the testator’s estate after their death. It is effective only at death and can be revoked at any time before death.

The meaning of certain terms

List of certain terms and acronyms

Chapter 1 – General information

This chapter provides general information on the different types of trusts and the filing requirements for each.

Types of trusts ▲

A trust is either a testamentary trust or an inter vivos trust. Each trust has different tax rules. Chart 1 – Types of Trusts below, describes different types of trusts and arrangements.

Testamentary trust

A testamentary trust is a trust or estate that is generally created on and as a result of the death of an individual. This includes a trust created under the terms of an individual’s will or by court order in relation to the deceased individual’s estate under provincial or territorial law.

Generally, this type of trust does not include a trust created by a person other than a deceased individual. It also does not include a trust created after November 12, 1981, if any property was contributed to it other than by a deceased individual as a consequence of the individual's death. For rules about testamentary trusts created before November 13, 1981, call 1-800-959-8281.

If the assets are not distributed to the beneficiaries according to the terms of the will, the testamentary trust may become an inter vivos trust.

For tax years ending after December 20, 2002, a testamentary trust may become an inter vivos trust if the trust incurs a debt or other obligation to pay an amount to, or guaranteed by, a beneficiary or any other person or partnership (any or all referred to as specified party), with whom any beneficiary of the trust does not deal at arm's length.

This does not apply for certain debts or other obligations, including those that are:

• incurred by the trust in satisfaction of a beneficiary's right to enforce payment of an amount payable by the trust to the beneficiary or to receive any part of the trust's capital
• owed to the beneficiary as a result of services provided by the beneficiary for the trust
• owed to the beneficiary as a result of a payment on behalf of the trust for which property was transferred to the specified party within 12 months of the payment and the beneficiary would have made the payment had they been dealing with the trust at arm's length

Inter vivos trust

An inter vivos trust is a trust that is not a testamentary trust.

Code number for the type of trust

A trust is either a testamentary trust or an inter vivos trust. Enter the code number for the type of trust.

Testamentary trusts:

• code 900, for a testamentary trust that is not identified by one of the other testamentary trust codes
• code 901, for a Lifetime Benefit trust
• code 903, for an estate that designated itself as a graduated rate estate (applicable for tax years ending after 2015)
• code 904, for a Qualified Disability trust (applicable for tax years ending after 2015 when Form T3QDT, Joint Election for a Trust to be a Qualified Disability Trust is submitted)
• code 905, for a Spousal or Common-Law partner trust

Inter vivos trusts

• code 300, Other trust
• code 301, for a Registered Retirement Savings Plan (RRSP) trust liable for tax under Part I
• code 302, for a Registered Retirement Income Fund (RRIF) trust liable for tax under Part I
• code 303, for a Registered Disability Savings Plan (RDSP) trust liable for tax under Part I
• code 304, for a Real Estate Investment trust (REIT)
• code 306, for a Salary Deferral Arrangement (SDA)
• code 307, for a Bare Trust
• code 311, for a Land Settlement Trust
• code 314, for an Environment Quality Act trust described in paragraph 149(1)(z.1)
• code 315, for a Nuclear Fuel Waste Act trust described in paragraph 149(1)(z.2)
• code 316, for an Hepatitis C trust described in paragraph 81(1)(g.3)
• code 317, for an Indian Residential Schools trust described in paragraph 81(1)(g.3)
• code 318, for a former tax-free savings account (TFSA) trust after the end of the exempt period
• code 319, for a Registered Education Savings Plans (RESP) trust liable under Part I
• code 320, for a TFSA trust liable for tax under Part I
• code 321, for an Employee Life and Health trust (ELHT)
• code 322, for a Spousal or Common-Law Partner trust. If the spouse or common-law partner died in the year, see the Note at the end of this listing
• code 323, for a Unit trust
• code 324, for a Mutual Fund trust
• code 325, for a Communal Organization trust
• code 326, for an Employee Benefit Plans trust
• code 327, for an Insurance Segregated Fund-Fully registered trust
• code 328, for an Insurance Segregated Fund-Partially registered trust
• code 329, for an Insurance Segregated Fund-non-registered
• code 330, for a Non-profit Organization-Subsection 149(5) trust
• code 331, for a Non-profit Organization trust-subsection 149(1)(l)
• code 332, for an Employee trust
• code 333, for a Blind/Revocable trust
• code 334, for a Personal trust
• code 335, for a Joint Spousal or Common-Law Partner trust. If the last surviving beneficiary (either the settlor, or the spouse or common law partner, as the case may be) died in the year; see the Note at the end of this listing.
• code 336, for an Alter Ego trust. If the settlor died in the year, see the Note at the end of this listing.
• code 337, for a Master trust
• code 338, for a Specified Investment Flow-Through (SIFT) trust
• code 340, Safe Drinking Water trust
• code 342, First Home Savings Account (FHSA)
• code 519, for a Pooled Registered Pension Plans (PRPP)

Who should file ▲

A trust (including a bare trust) that is required to file a T3 return, other than a listed trust generally must report beneficial ownership information on Schedule 15. For more information about Schedule 15, see “Schedule 15 – Beneficial Ownership Information of a Trust”.

The rules have changed in respect of the situations for which a T3 Return must be filed, effective for trust tax years ending on or after December 31, 2023. Refer to the applicable section below that corresponds to the tax year of the trust to determine whether the trust must file a T3 return.

Rules for tax years ending on or after December 31, 2023

For tax years ending on or after December 31, 2023, additional rules apply in respect of the requirement to file a T3 return. A T3 return must be filed if either A or B applies.

A. The trust is an express trust (or for civil law purposes a trust other than a trust that is established by law or by judgement) which is resident in Canada and is not a listed trust.

Note: This determination must also be applied to a trust deemed resident in Canada under subsection 94(3).

B. Income from the trust property is subject to tax, and:

• the trust is an express trust (or for civil law purposes a trust other than a trust that is established by law or by judgement) resident in Canada and is a listed trust, or
• the trust is not an express trust (or for civil law purposes a trust other than a trust that is established by law or by judgement) resident in Canada

   and, in the year, the trust:                                

• has tax payable
• is requested to file
• is resident in Canada and has either disposed of, or is deemed to have disposed of, a capital property or has a taxable capital gain (for example, a principal residence, or shares)
• is a non‑resident throughout the year, and has a taxable capital gain (other than from an excluded disposition described in subsection 150(5)) or has disposed of taxable Canadian property (other than in an excluded disposition)
• is a deemed resident trust
• holds property that is subject to subsection 75(2) of the Act
• has provided a benefit of more than $100 to a beneficiary for upkeep, maintenance, or taxes for property maintained for the beneficiary's use (for more information, see Line 22 – Upkeep, maintenance, and taxes of a property used or occupied by a beneficiary), or
• receives from the trust property any income, gain, or profit that is allocated to one or more beneficiaries, and the trust has:
  • total income from all sources of more than $500
  • income of more than $100 allocated to any single beneficiary
  • made a distribution of capital to one or more beneficiaries
  • allocated any portion of the income to a non-resident beneficiary

Where a trust is required to file for the first time, it will need to have a trust account number before being able to file a T3 return electronically. For more information on how to obtain a T3 account number, see “Trust account number".

Listed Trusts

The following are listed trusts:

• a trust that has been in existence for less than three months at the end of the year
• a trust that only holds certain types of assets with a fair market value that does not exceed $50,000 throughout the taxation year
• a trust that is required under the relevant rules of professional conduct or the laws of Canada or a province to hold funds for the purposes of the activity that is regulated under those rules or laws, provided it is not maintained as a separate trust for a particular client or clients. This provides an exception for a lawyer's general trust account, but not for specific client accounts
• a trust that qualifies as a non-profit organization described in paragraph 149(1)(l) of the Act or a registered charity
• a mutual fund trust 
• a related segregated fund trust, as defined in paragraph 138.1(1)(a) of the Act
• a trust, all the units of which are listed on a designated stock exchange
• a prescribed master trust
• a graduated rate estate
• a qualified disability trust
• an employee life and health trust
• a trust described under paragraph 81(1)(g.3) of the Act
• a trust under or governed by:
  • a deferred profit sharing plan
  • a pooled registered pension plan
  • a registered disability savings plan
  • a registered education savings plan
  • a registered pension plan
  • a registered retirement income fund
  • a registered retirement savings plan
  • a tax-free savings account
  • an employee profit sharing plan
  • a registered supplementary unemployment benefit plan
  • a first home savings account
• a cemetery care trust, or a trust governed by an eligible funeral arrangement

When must beneficial ownership information be submitted

A trust (including a bare trust) that is required to file a T3 return, other than a listed trust generally must report beneficial ownership information on Schedule 15. For more information about Schedule 15, see “Schedule 15 – Beneficial Ownership Information of a Trust”.

The new trust reporting requirements do not require the disclosure of information that is subject to solicitor-client privilege.

Although a listed trust may not be required to complete a Schedule 15, the trust may still be required to file a T3 return.

Rules for tax years ending before December 31, 2023.

You have to file a T3 return if income from the trust property is subject to tax, and in the tax year, the trust:

• has tax payable
• is requested to file
• is resident in Canada and has either disposed of, or is deemed to have disposed of, a capital property or has a taxable capital gain (for example, a principal residence, or shares)
• is a non-resident throughout the year, and has a taxable capital gain (other than from an excluded disposition described in subsection 150(5)) or has disposed of taxable Canadian property (other than from an excluded disposition)
• is a deemed resident trust
• holds property that is subject to subsection 75(2) of the Act
• has provided a benefit of more than $100 to a beneficiary for upkeep, maintenance, or taxes for property maintained for the beneficiary’s use (for more information, see “Line 22 – Upkeep, maintenance, and taxes of a property used or occupied by a beneficiary”), or
• receives from the trust property any income, gain, or profit that is allocated to one or more beneficiaries, and the trust has:
  
  • total income from all sources of more than $500
  • income of more than $100 allocated to any single beneficiary
  • made a distribution of capital to one or more beneficiaries, or
  • allocated any portion of the income to a non-resident beneficiary

Rental income or timber royalty from Canada

Rental income from real property in Canada or a timber royalty on a Canadian timber resource property is subject to a 25% withholding on the gross income under Part XIII, unless the rate is reduced by a reciprocal tax treaty.

A non-resident may file a separate T3 Return pursuant to an election under section 216 in respect of its net rental or timber royalty income.

Indicate “Section 216” on the top of the first page of the T3 Return. For more information, see IT393R2 – Election Re: Tax on Rents and Timber Royalties Non-Residents.

Trust account number

A trust account number is an alphanumeric identifier starting with the letter “T” and followed by an eight-digit number. You must provide this identifier on every T3 return, trust-related information slip, and any correspondence related to the trust. See “Failure to provide the trust account number” below.

In order to file a T3 return electronically, a Trust account number needs to be requested prior to filing the return.

This application also applies to a non-resident trust electing to file an income tax return under section 216 of the Income Tax Act. For more information please see the T4144 : Income Tax Guide for Electing Under Section 216.

If the residency status of a trust changes, after having been assigned a trust account number, the trust will continue to use the same trust account number.

If a trust, to which section 94 applies, is an electing trust with filing obligations under both its resident portion trust and its non-resident portion trust, these trusts must be filed separately using two distinct trust account numbers.

Applying for a trust account number

A trustee can apply for a trust account number using the CRA’s online trust account registration service, or Form T3APP, Application for Trust Account Number. 

For information about authorizing a representative for the trust, see “Giving or cancelling an authorization”. 

What you need before you apply

You need to know your trust name, trustee contact information, trust creation date, and trust type. If you are unsure of the trust’s name, see the section Name of trust under What to file - Instructions for bare trusts.

You will also need supporting documentation, such as a signed copy of the trust document or the last will and testament. In some situations, there may not be a written trust document or it may not be clear what constitutes a trust agreement.

Examples of documents establishing a trust relationship include, but are not limited to, the following:

• Trust agreement, deed, or settlement
• Trust declaration
• Last will and testament (in the case of a testate estate)
• Notarial will (Province of Québec)
• Certificate of appointment of estate trustee with the last will and testament attached for a testate estate
• Certificate of appointment of estate administrator for an intestate estate
• Bare trust agreement
• Documentation evidencing institutions and arrangements governed by the laws of the Province of Québec that are deemed to be trusts under subsection 248(3) of the Income Tax Act
• Other documentation evidencing the establishment and terms of the trust

As many different arrangements can be trusts, if there are no written documents for the trust, please submit a written summary (typewritten or legibly printed) of the nature of the trust arrangement, including the title “Summary of [enter trust name]”.

The written summary should include the date of creation of the trust and the full names of the trustees, settlor, and beneficiaries.

Online trust account registration services

You can access the Trust account registration services in these portals:

• My Account for Individuals, under "More Services" in the menu on the left-hand side
• My Business Account, under "More Services" in the menu on the left-hand side
• Represent a Client, in the menu on the left hand side

The trust’s supporting documentation can be uploaded electronically at the time of registration, using the Submit trust documentation button on the last page of the registration process.

Using Form T3APP, Application for Trust Account Number 

Fill out and sign Form T3APP and send it to the CRA with a copy of the trust's supporting documentation at the applicable address listed on page 3 of the Form T3APP. You can either:

• Use the “Submit documents” service in My Account for Individuals or in “Represent a Client” (for authorized representatives) or
• Mail the documents to the CRA, using the information on page 3 of Form T3APP

You can find Form T3APP at Forms and publications.

Receiving your trust account number

If you use the Trust Account Registration service, you will receive the trust account number immediately after you complete the online registration process. Ensure to send us a copy of the trust document or signed last will and testament.

Offline access to My Trust Account

A trustee or an authorized representative can obtain information and request certain changes by mail or by phone using the contact information for their tax centre listed under "If the trust resides in:" of this guide.

Online access to My Trust Account

My Trust Account can be accessed through Represent a Client. To gain access to My Trust Account, primary trustees must have access to Represent a Client with a representative identifier (RepID). Once the trust account number has been issued, the trustee needs to register as Primary Trustee through the Authorization request option of Represent a Client. If you do not have access to Represent a Client, you can register online. For more information, go to Registration process to access the CRA sign-in services.

Failure to provide the trust account number

After the CRA assigns the trust account number, you must use it when filing the trust’s T3 return. Each failure to do so will result in a $100 penalty.

What to file ▲

Trusts listed in Chart 1 – Types of Trusts may have to file a T3 return and any related schedules and statements, if they meet the requirements listed in "Who should file". The T3 return is filed as both an income tax return, which calculates tax liability, and an information return, which reports amounts allocated and designated to beneficiaries. When the trust files its first T3 return, send a copy of the trust document or signed last will and testament, if not already provided.

You may also have to file the following, depending on the type of amounts paid or allocated by the trust.

• If the trust allocated amounts to resident beneficiaries, file the T3 Summary, Summary of Trust Income Allocations and Designations and the related T3 slips. For more information, see Chapter 4 – T3 slip and T3 Summary.
• If the trust paid executor, liquidator, or trustee fees, or if an employee benefit plan or an employee trust made distributions other than a return of employee contributions, file a T4SUM Summary of Remuneration Paid, and the related T4 Statement of Remuneration Paid (slip). For more information, see RC4120 Employers' Guide – Filing the T4 Slip and Summary.
• If the trust paid scholarships, fellowships, bursaries, prizes, or research grants to a resident of Canada, file a T4ASUM Summary of Pension, Retirement, Annuity, and Other Income, and the related T4A slip, Statement of Pension, Retirement, Annuity, and Other Income. For more information, see RC4157 Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.
• If the trust paid or credited, or is considered to have paid or credited, amounts to a non-resident beneficiary, file an NR4SUM Return of Amounts Paid or Credited to Non-Residents of Canada, and the related NR4 Statement of Amounts Paid or Credited to Non-Residents of Canada. For more information, see Guide T4061 NR4 – Non-Resident Tax Withholding, Remitting, and Reporting.
• If the trust paid fees to a non-resident of Canada for services performed in Canada and the non-resident acts in the capacity of an executor in the course of a business, file a T4A-NR-SUM Summary of Fees, Commissions, or Other Amounts Paid to Non-Residents for Services Rendered in Canada, and the related T4A-NR Statement of Fees, Commissions, or Other Amounts Paid to Non-Residents for Services Rendered in Canada. For more information, see Guide RC4445 T4A-NR – Payments to Non-Residents for Services Provided in Canada.
• A trust (including a bare trust) that is required to file a T3 return, other than a listed trust generally must report beneficial ownership information on Schedule 15. For more information about Schedule 15, see “Schedule 15 – Beneficial Ownership Information of a Trust”.

Form T3-DD, Direct Deposit Request for T3

We can deposit a trust’s T3 refund into the trust’s account at a financial institution in Canada.

To enrol for direct deposit or to update a trust’s banking information, the trustee or other authorized person can complete Form T3-DD Direct Deposit Request for T3, and send it to the CRA. For more information, go to Direct deposit - Canada Revenue Agency.

When to file ▲

The filing due date depends on the trust's tax year-end.

Tax year-end and fiscal period

Graduated Rate Estate

A graduated rate estate (GRE) can have a non-calendar tax year (the period for which the accounts of the estate are made up for purposes of assessment). A GRE will have a deemed tax year-end on the day on which the estate ceases to be a GRE, which will be no later than the day on which the 36-month period after the death of the individual ends.

Later tax year-ends will generally be on a calendar-year basis. For example, where an estate is created in June 2020, and is a GRE for 2020, 2021 and 2022, a deemed year-end will occur in June 2023 on the 3-year anniversary of the individual’s date of death. The testamentary trust will also have a tax year-end on December 31, 2023.

All other trusts

All other trusts are generally required to use a December 31 tax year-end. However, an exception is available for mutual fund trusts that elect to have a December 15 year-end. A mutual fund trust that previously elected to have a December 15 year-end can revoke the election. For more information, call 1-800-959-8281.

Deemed year-end rules for all trusts

There are other situations in which a trust would be subject to a deemed year-end that may affect its tax year-end. For example, if a trust ceased to be resident in Canada on June 14, 2023, a deemed year-end would be triggered and the trust would be considered to have a tax year from January 1 to June 14, 2023. For more information, call 1-800-959-8281.

Filing dates

In the same calendar year, you have to file the T3 return, the related T3 slips, NR4 slips, and T3 and NR4 Summaries no later than 90 days after the trust’s tax year-end (see Tax year-end and fiscal period). You should also pay any balance owing no later than 90 days after the trust’s tax year-end.

If you do not have the information slips you need to complete the return when it is due, estimate the income. If, after you receive the slips, you find your estimate differs from the actual amounts, send the slips and a letter to us, requesting an adjustment to the trust’s income. For more information, see Reassessments.

Received dates

If you mail the return first class, or if you use an equivalent delivery service, we consider the date of the postmark on the envelope to be the day you filed the return.

When the due date falls on a Saturday, Sunday, or public holiday recognized by the CRA:

• Your return is considered on time if the CRA receives it, or it is postmarked on or before the next business day.
• Your payment is considered on time if the CRA receives it on, or it is processed at a Canadian financial institution on or before the next business day.

For more information, go to When to file a T3 return.

For information on penalties on late-filed returns, and interest on unpaid taxes, see “Penalties and interest”.

Deadline for distributing T3 slips – You must send the T3 slips to the beneficiary's last known address no later than 90 days after the end of the trust's tax year. If you have the information you need to complete the slips before that deadline, we encourage you to send them to the beneficiaries as early as possible.

Final T3 return

For a testamentary trust that is a graduated rate estate, you have to file the final T3 return and pay any balance owing no later than 90 days after the trust’s wind-up (discontinuation) date. Enter the wind-up date on page 2 of the return.

If you wind up a graduated rate estate, the tax year will end on the date of the final distribution of the assets.

If you wind up an inter vivos trust or a testamentary trust (other than a graduated rate estate), you have to file the final T3 return and pay any balance owing no later than 90 days after the trust’s tax year-end.

In either case, you should get a clearance certificate before you distribute the trust property. For more information, see Clearance certificate.

How to file the T3 return ▲

Filing through EFILE

You have the option to file this return through EFILE. For more information about this filing method, go to EFILE for electronic filers.

Starting on January 1, 2024 tax preparers must electronically file any return of income of trusts or estates that they prepare for consideration, except that five of the returns of trusts or states may be filed by other means. For more information see "Electronic Filing by Tax Preparers" in What's New.

T3 EFILE Exclusions

You cannot file a Trust return electronically in any of the following situations, any related schedules, and forms listed below:

• The return is an amended T3 trust return.
• The return is for a tax year that ends before 2021.
• The trust does not have a trust account number.
• The trust is filing Form RC199, Voluntary Disclosures Program (VDP) Taxpayer Agreement, or the taxpayer is making a request under the Voluntary Disclosures Program.
• Form T1273, Statement A - Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals and Form T1163, Statement A - AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals are excluded from T3 EFILE.
• T3 NB-SBI, T3 New Brunswick Small Business Investor Tax Credit.
• T3SK CG, Saskatchewan Farm and Small Business Capital Gains Tax Credit (Trusts).
• T3PFT, T3 Provincial or Territorial Foreign Tax Credit for Trusts.
• Business income tax paid to more than 3 foreign countries on Form T3FFT, T3 Federal Foreign Tax Credits for Trusts.
• Non-business income tax paid to more than 3 foreign countries on Form T3FFT, T3 Federal Foreign Tax Credits for Trusts.
• More than 12 Selected Financial Data (SFD) records.
• A claim for Return of fuel charge proceeds to farmers tax credit for a 2021 tax year.
• A claim for Yukon Business Carbon Price Rebate for a 2021 tax year.
• Trusts claiming bankruptcy in the year.
• Trusts filing Form T2223, election, under subsection 159(6.1) of the income tax act, by a trust to defer payment of income tax.

Filing of T3 Summary and Slips

Beginning January 1, 2024, if you file more than five T3 slips for a calendar year you must file them electronically to avoid penalties. See information on filing the T3 Summary and T3 slips electronically using Internet file transfer or Web forms.

As of January 1, 2024, if you file more than five T3 Slips for a calendar year and you do not file the T3 Slips electronically, see Failure to file electronically.

For the latest information about the penalty for not filing information returns over the Internet, go to How to file information returns. You can also subscribe to our email distribution list about the electronic filing of information returns at Canada Revenue Agency electronic mailing lists.

Filing on paper

Where you file the T3 return depends on whether the trust is resident in Canada, or is a non-resident trust or deemed resident trust. If the trust is resident in Canada, where you file the T3 return depends on the trustee’s address.

We consider a trust to reside where its real business is carried on, which is where the central management and control of the trust actually takes place. Usually, the management and control of the trust rests with, and is exercised by, the trustee, executor, liquidator, administrator, heir or other legal representative of the trust. The residence of the trustee (or other representative of the trust) does not always determine the residence of a trust. See also Residence of trust.   

If the trust resides in:

New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, or the remainder of the provinces of Ontario and Quebec not listed under the Winnipeg Tax Centre.

Send the T3 return to:

Sudbury Tax Centre
T3 Trust Returns Program
1050 Notre Dame Avenue
Sudbury ON  P3A 6C2 

If you have questions about resident trusts, call 1-800-959-8281.

If the trust resides in:

Manitoba, Saskatchewan, Alberta, British Columbia, Northwest Territories, Yukon, Nunavut, Hamilton (Ontario) and surrounding area, Kitchener-Waterloo (Ontario) and surrounding area, Laval (Quebec) and surrounding area, Montreal (Quebec) and surrounding area, and Sherbrooke (Quebec) and surrounding area.

Send the T3 return to:

Winnipeg Tax Centre
T3 Trust Returns Program
PO Box 14003, Station Main
Winnipeg MB  R3C 0N8

If you have questions about resident trusts, call 1-800-959-8281.

Non-resident trusts and deemed resident trusts

Send the T3 return to:

Winnipeg Tax Centre
T3 Trust Returns Program
PO Box 14003, Station Main
Winnipeg MB  R3C 0N8
Canada

If you have questions about non-resident trusts or deemed resident trusts, call one of the following numbers:

• Toll free within Canada and the continental USA: 1-800-959-8281.
• If you are outside Canada and the United States, call 613-940-8495. The CRA only accepts collect calls made through a telephone operator. After your call is accepted by an automated response, you may hear a beep and notice a normal connection delay. This service operates in Eastern Standard Time and is open Monday to Friday from 8:00 am to 8:00 pm and Saturday from 9:00 am to 5:00 pm.

Penalties and interest ▲

Penalties

Failure to file a T3 return

If you do not file the T3 return by the due date, we will charge a late‑filing penalty. The penalty is 5% of the unpaid tax when the return was required to be filed plus 1% of such unpaid tax for each full month that the T3 return is late, to a maximum of 12 months.

The late filing penalty will be higher if we issued a demand to file the T3 return, and we assessed a late filing penalty in respect of a T3 return for any of the three preceding tax years. In this case, the penalty may be 10% of the unpaid tax when the return was required to be filed, plus 2% of such unpaid tax for each full month that the return is late, to a maximum of 20 months.

The trust will be subject to an alternative penalty if it has no taxes on the date it is required to be filed. This alternative late-filing penalty is $25 a day for each day the return is late, from a minimum of $100 to a maximum of $2,500.

If the trust is not a listed trust, an additional penalty may apply if you knowingly, or under circumstances amounting to gross negligence, failed to file a return. See “False statements or omissions - If the trust is not a Listed Trust” below.

Repeated failure to report income

If you failed to report an amount of income on your T3 return for 2023 and you also failed to report an amount of income on your T3 return for 2020, 2021, or 2022, you may have to pay a federal and provincial or territorial repeated failure to report income penalty. We will consider that there is a failure to report income if you did not report an amount of income equal to or greater than $500 for a tax year and where such failure is not made knowingly or under circumstances amounting to gross negligence.

The federal and provincial or territorial penalties are each equal to the lesser of:

• 10% of the amount you failed to report on your T3 return for 2023
• 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report

However, if you voluntarily tell us about an amount you failed to report, we may waive these penalties. For more information, go to Voluntary Disclosures Program (VDP).

False statements or omissions

If the trust is not a Listed Trust

For tax year ending on or after December 31, 2023, a penalty may apply if the trust is not a listed trust and you a person or partnership knowingly or under circumstances amounting to gross negligence either:

• made, participated in, assented to or acquiesced in the making of a false statement or an omission on the trust’s T3 return.
• failed to file a trust return, or
• failed to comply if we issued a demand to file the trust’s T3 return

Where there has been a failure to file a T3 return other penalties may also apply.

The penalty is equal to the greater of: 

• $2500
• 5% of the highest amount at any time in the year that is equal to the total fair market value of all the property of the trust at that time

In addition, you may be assessed a further penalty in respect of a false statement or an omission, equal to the greater of:

• $100
• 50% of the understated tax and/or the overstated credits related to the false statement or omission

If the trust is a Listed Trust

You may have to pay a penalty if you knowingly or under circumstances amounting to gross negligence have made a false statement or an omission on the trust’s T3 return.

The penalty is equal to the greater of:

• $100
• 50% of the amount of any understated tax and overstated credits related to the false statement or omission.

If you fail to provide any information on your T3 return, you may also have to pay a penalty of $100 in respect of that failure.

The trustee or tax preparer will also be subject to penalties if, due to culpable conduct, they prepare, or participate in the preparation of, income tax or information returns, forms, or certificates on behalf of another person and make false statements.

Failure to distribute/file trust-related information slip as required

• If you distribute any trust‑related information slip to a recipient late, the penalty is $25 a day for each day the slip is late, from a minimum of $100 to a maximum of $2,500, for each failure to comply with this requirement.
• The minimum penalty for failing to file a trust‑related information slip by the due date is $100 and the maximum penalty is $7,500.

If you are convicted of not filing a T3 return or T3 slip as and when required, you are liable to a fine of $1,000 to $25,000, or to a fine and imprisonment for a period of up to 12 months.

Failure to file electronically

Starting January 1, 2024, if you file more than 5 information returns of a same type for a calendar year, you must file the information returns electronically. After filing the original information return, slips can be amended, added, or deleted in paper or electronic format. For more information, see section “Choose the filing method to amend, add, replace or cancel T3 slips”.

If you do not file electronically when you are required to do so, the penalty the CRA assesses is based on the number of information returns filed in an incorrect format. Each slip is an information return.

The penalty is calculated per type of information return. For example, if you file 6 NR4 slips and 6 T4 slips on paper, the CRA would assess two penalties of $125, one per type of information return.

For the latest information about the penalty for not filing information returns over the Internet, go to How to file information returns.

You can also subscribe to our email distribution list about the electronic filing of information returns at Canada Revenue Agency electronic mailing lists.

Interest

We pay compounded daily interest, at a prescribed rate, on a tax refund starting on the latest of:

• the 30th day after the balance is due for the tax year
• the 30th day after the return for the tax year was filed
• the day the overpayment arises

We charge interest on unpaid amounts and the total amount of penalties assessed. We calculate this interest, compounded daily, at a prescribed rate starting on the day after the unpaid amount was due until the date of its payment.

Cancel or waive penalties or interest

The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA discretion to cancel or waive penalties and interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.

The CRA’s discretion to grant relief is limited to any period that ends within 10 calendar years before the year in which a relief request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to a penalty for a tax year or fiscal period ending in 2013 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to interest that accrued in 2013 or later.

Taxpayer relief requests can be made online using the CRA’s My Account, My Business Account (MyBA), or Represent a Client digital services:

• My Account: After signing in, select “Accounts and payments,” then “Request relief of penalties and interest.”
• MyBA or Represent a Client: After signing in, on the MyBA overview page, select the appropriate program from the navigation menu, then select the correct account. Finally, select “Request relief of penalties and interest” under the “Request” heading.

You can also fill out Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties and Interest, and send it with one of the following ways:

• online with My Account: select “Submit documents” under the “Correspondence” section
• online with MyBA or Represent a Client: select “Submit documents” from the banner at the top of the page
• by mail to the designated office, as shown on the last page of the form, based on your place of residence

For information, go to Submit documents online.

For more details on the required supporting documents, relief from penalties and interest, and other related forms and publications, go to Cancel or waive penalties and interest at the CRA.

Payment options

T3 payments can be made online using CRA’s My Payment service with a Visa debit, debit MasterCard or Interac Online card from a participating Canadian financial institution. For more information, go to Pay now with My payments.

You can send us a cheque or money order payable to the Receiver General. Do not mail cash. To help us credit the correct account, write the trust’s name and account number on the front of your payment. Enter on line 72, the amount of the payment.

If you make a payment that your financial institution does not honour, including a cheque on which you put a stop payment, the CRA will charge you a fee. Generally, this fee will be $15 for each returned cheque, plus interest, if applicable.

If you or your representative does not have a bank account at a financial institution in Canada, you or your representative can send your payment:

• using a wire transfer
• an international money order drawn in Canadian dollars
• a bank draft in Canadian dollars drawn on a Canadian bank

For more information, go to Payments to the CRA or contact your financial institution.

Electronic remittances or payments above $10,000

As of January 1, 2024, remittances or payments to the Receiver General of Canada should be made as an electronic payment if the amount is more than $10,000. Payers may face a penalty, unless they cannot reasonably remit or pay the amount electronically. For more information, go to Payments to the CRA.

After you file ▲

Processing times

We can usually assess a T3 return, that was filed by paper within 17 weeks.

Reassessments

If you need to change a T3 return after you send it to us, do not file another return for that tax year. Send us a completed Form T3-ADJ T3 Adjustment Request, or a letter providing the details of the change. Indicate the trust's account number, the tax year you want us to change, and send us any supporting documents.

You can submit Form T3‑ADJ T3 Adjustment Request online in My Account for Individuals by using the “Submit documents” service. Your authorized representative can access this online service through Represent a Client.

We can reassess your T3 return, make additional assessments, or assess tax, interest, or penalties within one of the following:

• three years (four years for mutual fund trusts) from the date of your original notice of assessment or a notice that no tax was payable for the tax year (this period is called the "normal reassessment period")
• six years (seven years for mutual fund trusts) from the date of your original notice of assessment to allow or change a carryback of certain deductions, such as a loss or an unused investment tax credit

Your request should be postmarked before the end of the above periods for us to consider reassessing your return.

The taxpayer relief provisions permit the CRA to issue income tax refunds or reduce income tax payable for individuals and graduated rate estate beyond the normal three-year period. The CRA’s discretion to grant relief is limited to any period that ended within 10 years before the calendar year in which a request is submitted or an income tax return is filed.

Testamentary trusts can still benefit from these provisions for tax years that ended on or before December 31, 2015. We usually base our initial assessment on the income you report. Later, we may select the return for a more in-depth review or audit. We can also reassess a return at any time if:

• You have made a misrepresentation because of neglect, carelessness, wilful default, or fraud in either filing the return or supplying information required by the Act.
• You file Form T2029 Waiver in respect of the normal reassessment period or extended reassessment period, with your tax services office before the normal reassessment period expires. If you want to revoke a waiver you previously filed, file Form T652 Notice of Revocation of Waiver. The revocation will take effect six months after you file Form T652.

If requested by T3 Trusts Audit, you can submit the documentation online.

Tax Administration Rules

For 2016 and subsequent tax years, the following administration rules, only available to GRE, extend the period:

• during which the CRA may refund an overpayment of tax
• during which, at the trust’s request, the CRA may reassess or make determinations in respect of certain income tax liabilities
• for objecting to a tax assessment
• for filing an agreement to transfer forgiven amounts under the debt forgiveness rules

How to register a formal dispute

If you disagree with your assessment or reassessment, you can make a formal objection.

Filing an objection is the first step in the formal process of resolving a dispute. The time limit for filing an objection is as follows:

• If you are an individual (other than a trust), or filing for a graduated rate estate, the time limit for filing an objection is either one year after the due date for the return or 90 days after the date of the notice of assessment or notice of reassessment, whichever is later. If you did not file your objection on time, you can apply for a time extension within one year of your original time limit to file an objection. You can apply by writing to the Chief of Appeals at your Appeals Intake Centre or by using My Account for Individuals if you are an individual, or My Business Account if you are a business owner. Include the reasons why you were prevented from filing on time.
• In every other case, including the assessment of taxes in respect of over-contributions to an RRSP or a TFSA, you have to file an objection within 90 days after the date of the notice of assessment or notice of reassessment.

You or your representative can choose to file your objection by using one of these options:

• making an online submission in Represent a client
• sending a completed Form T400A Notice of Objection – Income Tax Act, or a signed letter to the chief of appeals at your appeals intake centre

For more information about objections and appeals to your income tax assessment or reassessment, go to Service feedback, objections, appeals, disputes, and relief measures.

Elections

The taxpayer relief provisions permit the CRA to accept certain late, amended, or revoked income tax elections. This applies to both of the following elections that we discuss in this guide:

• 164(6) election by an estate
• preferred beneficiary election

A late, amended, or revoked election is subject to a penalty of $100 for each complete month from the due date of the election to the date of the request. The maximum penalty is $8,000.

For more information about the taxpayer relief provisions, go to Taxpayer relief provisions.

What records do you have to keep?

You have to keep your books, records, and supporting documents in case we need to verify the income or loss you reported on the return. Generally, you must keep them for at least six years from the tax-year-end to which they relate. However, you can request permission to dispose of them before the end of this period.

For more information, go to Keeping records, or see Information Circular IC78-10R Books and Records Retention/Destruction.

Clearance certificate

You can distribute property without a clearance certificate, as long as you keep sufficient property in the trust to pay any amounts owing to the CRA. However, by getting a clearance certificate, you will avoid being personally liable for unpaid taxes, interest, and penalties.

We cannot issue a clearance certificate until you have done both of the following:

• filed all the required returns and we have assessed them
• paid or secured all amounts owing

To ask for a clearance certificate, complete Form TX19 Asking for a Clearance Certificate. You can submit the completed request by mail or fax, or online, using Represent a Client, My Account, or My Business Account as indicated on the TX19. 

For more information, see Information Circular IC82-6R Clearance Certificate.

Chapter 2 – Completing the T3 return

The T3RET, T3 Trust Income Tax and Information Return is a five-page form with related schedules. The following information will help you to complete the return.

Step 1 – Identification and other required information ▲

Complete all items on page 1 of the T3 return. The assessment of the return may be delayed if you do not provide all the information.

If this is the first year of filling a T3 return, you may register for a trust account number online using the Trust account registration service through one of the Canada Revenue Agency (CRA)'s secure portals.

If this is the first year filing a T3 return, send us a copy of:

• The trust document or last will and testament (unless already filed with the T3 APP, or sent after completing the online trust account registration process).

Trust account number – If we have assigned an account number to the trust, enter it in this space. Include this number on all correspondence related to the trust. If this is the first return for the trust, we will issue an account number, which will appear on the notice of assessment.

Name of trust – Use the same name on all returns and correspondence for the trust. The name of the trust will be modified to meet our requirements if it is longer than 60 characters. For guidelines on what name to use for a bare trust see “What to file - Instructions for bare trusts”.

Residence of trust – A trust resides where its real business is carried on, which is where the central management and control of the trust actually takes place. For information about the residence of a trust or estate, see Income Tax Folio S6-F1-C1, Residence of a Trust or Estate.

Trustee Information – Enter the full name of the trustee. If the trust has more than one trustee, choose one trustee to be the CRA's primary contact. The trustee can be an individual or a non-individual. Choose only one of the two options and fill in the required information about the trustee. If the trustee is a non-individual then enter the full name of the contact person.

Mailing address – We may modify part of your address to meet Canada Post's requirements. Therefore, the address on any cheques or correspondence we send you may be different from the one you indicate on the trust's return. If you include the name and mailing address of a contact person, we will send any cheques or correspondence for the trust in care of that person.

Designated Aboriginal settlement lands – If the trust resides on designated Aboriginal settlement lands, answer yes, and enter the name and settlement number in the spaces provided.

The settlement lands and their numbers are as follows:

British Columbia:

Yukon:

Northwest Territories:

Newfoundland and Labrador:

When you enter this information on the return, we will transfer part of any tax payable to the government of the Aboriginal settlement where the trust resides.

Date of residency – Provide the date the trust became a resident of Canada or ceased to be a resident of Canada during the tax year, if applicable.

Deemed resident trust – Indicate if the trust is a deemed resident trust and provide the name of any other country in which the trust is considered to be resident. See the definition of a deemed resident trust in Chart 1 – Types of Trusts.

Type of trust – It is important that you complete this section correctly because we use this information to determine the correct rate of tax. To identify the correct type of trust, see Chart 1 – Types of Trusts and Code number for the type of trust. This information is mandatory. If this information is not entered, the process of the T3 return may be delayed.

Date of death (if the trust is a testamentary trust) or Date trust was created (if the trust is an inter vivos trust) – Provide this information on each return.

Social Insurance Number of the deceased – If the trust is a testamentary trust, enter the Social Insurance Number of the deceased. The Social Insurance Number of the deceased individual is mandatory for graduated rate estates.

Non‑profit organization – If the non‑profit organization is incorporated, enter the business number and program account.

Reporting foreign income and property

If the trust is resident in Canada or deemed to be resident in Canada, you have to report its income from all sources, both inside and outside Canada. Report in Canadian dollars foreign income and other foreign currency amounts (such as expenses and foreign taxes paid).

If a resident trust or a deemed resident trust conducts business with a foreign affiliate, or owns specified foreign property in excess of CAN$100,000, you may have to file special returns. For more information, call 1-800-959-8281.

Specified foreign property includes all of the following:

• funds or intangible property (patents, copyrights, etc.) situated, deposited or held outside Canada
• tangible property situated outside Canada
• a share of the capital stock of a non-resident corporation held by the taxpayer or by an agent on behalf of the taxpayer
• an interest in a non-resident trust that was acquired for consideration, other than an interest in a non-resident trust that is a foreign affiliate for the purposes of section 233.4 of the Act
• shares of corporations resident in Canada held by you for you outside Canada
• an interest in a partnership that holds a specified foreign property unless the partnership is required to file Form T1135 Foreign Income Verification Statement
• an interest in, or right with respect to, an entity that is a non-resident
• a property that is convertible into, exchangeable for, or confers a right to acquire a property that is specified foreign property
• a debt owed by a non-resident, including government and corporate bonds, debentures, mortgages, and notes receivable
• an interest in a foreign insurance policy
• precious metals, gold certificates, and futures contracts held outside Canada

Specified foreign property does not include any of the following:

• a property used or held exclusively in carrying on an active business
• a share of the capital stock or indebtedness of a foreign affiliate
• an interest in a trust described in paragraph (a) or (b) of the definition of “exempt trust” in subsection 233.2(1)
• a personal‑use property as defined in section 54
• an interest in, or a right to acquire, any of the above-noted excluded foreign property

You can also find specific information on the following forms:

• T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates
• T1135, Foreign Income Verification Statement
• T1141, Information Return in Respect of Contributions to Non-Resident Trusts, Arrangements or Entities
  
• T1142, Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust

You may be able to claim a foreign tax credit when you calculate your federal, provincial or territorial taxes. For more information, see Form T3FFT, T3 Federal Foreign Tax Credits, and Form T3 PFT, T3 Provincial or Territorial Foreign Tax Credit.

Other required information

Answer all the questions on page 2 of the T3 Return. The following information will help you answer some of the questions.

Question 1 – If the trust is not a trust to which section 94 applies, do not answer this question.

Where a deemed resident trust has received property from multiple contributors, it may file an election to have certain property that was not contributed to the trust by the resident contributors and/or, where there is a resident beneficiary, the connected contributors, be part of a separate trust that is not subject to section 94 (the non-resident portion trust). This election is non-revocable.

If the trust is an electing trust, indicate what year the trust became an electing trust. For the year indicated, include a schedule showing all of the trust’s assets and specifying allocation of assets between the resident portion trust and the non-resident portion trust. Include schedules for subsequent years only if changes occur.

CRA considers the electing trust and its non-resident portion trust to be two separate trusts. If the non-resident portion trust has any Canadian filing obligations under Part I or Part XIII as a non-resident trust, it must report those amounts as a separate trust under a separate trust number from the deemed resident trust.

Question 2 – The terms of the will, trust document, or court order determine the requirement to allocate income. The trust may be required to pay out its income to a beneficiary. In this case, the income cannot be retained and taxed in the trust, unless the trust has made a designation under subsections 104(13.1) or 104(13.2). For more information, see Income to be taxed in the trust.

Question 3 – If you answer yes, send us a statement giving all required information. For more information, see Distribution of property to beneficiaries.

Question 4 – If you answer yes, send us a statement giving all required information only if the trust is a personal trust, spousal or common law partner trust, joint spousal or common law partner trust, or alter ego trust.

Question 5 – This question relates to spousal and similar trusts under subsection 104(13.4) and for purposes of this question, a lifetime beneficiary under the trust is:

• the last surviving beneficiary (either the settlor, or the spouse or common-law partner, as the case may be) of an alter ego trust, a joint spousal or common-law partner trust.
• an individual (other than a trust) who transferred property in circumstances described in subparagraph 73(1.02(b)(ii) or subsection 107.4(1).

Question 6 – For a discussion as to the meaning of the term “at arm’s length”, see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

Question 7 – If you answer yes, provide the date and send us a statement showing the changes. For information on the disposition of an income interest in a trust, see archived Income Tax Folio S6-F2-C1, Disposition of an Income Interest in a Trust.

Question 8 – A yes response to this question only applies to personal trusts.

Question 9 – See Contribution of property in the definitions section.

Question 10 – A yes response to this question only applies to a mutual fund trust.

Question 11 – If a trust used International Financial Reporting Standards (IFRS) when it prepared its financial statements, answer yes.

IFRS is the collection of financial reporting standards developed by the International Accounting Standards Board (IASB). For more information, go to International Financial Reporting Standards (IFRS).

Question 12 – If you answer yes, provide the date of the loss restriction event.

For more information about a loss restriction event, see Loss trading – Rules for trusts.

Questions 13 and 14

Questions 13 and 14 relate to the new requirement to file beneficial ownership information, see “What’s new for 2023”. As noted, a trust that is required to file a T3 return, other than a listed trust described, generally must report beneficial ownership information on Schedule 15.

Providing the information required on page 1 and the top of page 2 of the return will identify many listed trusts described. Questions 13 and 14 identify two situations where the trust may be a listed trust and therefore is not required to complete a Schedule 15.

Question 13 – This is a new question regarding the reporting requirements for trusts that come into effect for tax years ending on or after December 31, 2023.

The assets listed in paragraph 150 (1.2)(b) are:

• money; (see Note)
• certain government debt obligations (described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3));
• a debt obligation described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3);
• a share, debt obligation or right listed on a designated stock exchange;
• a share of the capital stock of a mutual fund corporation;
• a unit of a mutual fund trust;
• an interest in a related segregated fund (within the meaning assigned by paragraph 138.1(1)(a)); and
• an interest as a beneficiary under a trust, all the units of which are listed on a designated stock exchange.

If you answered “yes” to this question, you do not need to file a Schedule 15 with your tax return to disclose beneficial ownership information of the trust.

Question 14 – This is a new question regarding the reporting requirements for trusts that come into effect for tax years ending on or after December 31, 2023.

This provides an exception for a lawyer’s general trust account but not for specific client accounts.

If you answered “yes” to this question you do not need to file a Schedule 15 with your tax return to disclose beneficial information of the trust.

What to file - Instructions for bare trusts

• Identify the type of trust as Bare Trust by selecting “code 307, Bare Trust” and provide the trust creation date in the appropriate field.
• If this is the first year of filing a T3 Return, send us a copy of the trust document, unless such information or document has been previously submitted. See “Applying for a trust account number” for more information on what documents may be required.
• Where applicable, provide a response and information related to whether the trust is filing its final return (and if so, provide the date on which the trust has been terminated or wound up in the year).
• Provide a response and information related to applicable questions on page two of the T3 return.

Name of trust – If there is a written trust deed, or other agreement governing the bare trust and the document identifies a name for the bare trust, enter it in the name field. When a bare trust has not been named, follow these guidelines:

• List the legal name of the beneficial owner(s). For example, the full corporate name identified in the articles of incorporation for businesses, or the first and last names for an individuals - with the word “trust” at the end
• The name field is limited to 60 characters, if the name(s) exceeds the 60 character limit, use 54 characters for the names, followed by a space and the word “trust” at the end of the field.

Complete the last page including the parts “Name and address of person or company who prepared this return” and “Certification”.

For bare trusts, the remaining parts of the T3 Return can be left blank. All income from the trust property for a taxation year should be reported on the beneficial owner’s return of income.

Complete all parts of Schedule 15. See “Schedule 15 – Beneficial Ownership Information of a Trust” for the information to be entered on Schedule 15.

Step 2 – Calculating total income: Lines 1 to 12

Line 1 – Taxable capital gains

Calculate the taxable capital gains and allowable capital losses of the trust on Schedule 1.

If the amount on line 24 of Schedule 1 is a taxable capital gain, enter it on line 1.

If the amount on line 24 of Schedule 1 is a net capital loss, do not enter it on line 1. You cannot deduct the net capital loss from other income of the trust in the year, or allocate it to the beneficiaries (except as described under Exceptions and limits to income allocations). You can only use it to reduce the trust's taxable capital gains of other years. For more information, see Line 34 – Net capital losses of other years.

If a trust sells capital property that is qualified farm or fishing property, or qualified small business corporation shares and realizes a gain, the gain may qualify for the capital gains deduction to be claimed by a beneficiary of the trust. For more information, see Line 921 – Taxable capital gains.

For more information, see:

• Guide T4037, Capital Gains
• Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income

Line 2 – Pension income ▲

Enter amounts that the trust received from any of the following:

• registered pension plans
• retirement compensation arrangements
• deferred profit sharing plans
• superannuation plans
• foreign retirement arrangements

When an amount is considered to have been distributed to an estate from a foreign retirement arrangement according to the laws of the country where the arrangement was established, the payment is also deemed received by the estate for tax purposes in Canada. In this case, you must include the amount, in Canadian funds, on line 2.

Line 3 – Total of actual amount of dividends from taxable Canadian corporations ▲

Enter the total of the actual amount of dividends received from taxable Canadian corporations from line 3 of Schedule 8. On line 3A, enter the actual amount of dividends other than eligible dividends from line 1 of Schedule 8. Send to the CRA all information slips received. For more information, see Lines 1 to 3 – Dividends from taxable Canadian corporations.

Line 4 – Foreign investment income ▲

Enter all interest and other investment income from foreign sources from line 6 of Schedule 8. For more information, see the tax tip below and Lines 4 to 6 – Foreign investment income.

Line 5 – Other investment income ▲

Enter the amount from line 12 of Schedule 8.

Include all interest and investment income from Canadian sources except dividends from taxable Canadian corporations reported on line 3. Send to the CRA all information slips received. For more information, see Lines 7 to 12 – Other investment income.

Thin capitalization – Rules for trusts

The scope of the application of the thin capitalization rules will be extended to:

• Canadian-resident trusts
• non-resident corporations and trusts that operate in Canada

These measures will also apply where a Canadian-resident trust or a non-resident trust is a member of a partnership.

Canadian resident trusts

A trust’s “equity” for the purposes of the thin capitalization rules will generally consist of contributions to the trust from specified non-residents plus the tax paid earnings of the trust, less any capital distributions from the trust to specified non-residents. The permitted 1.5 to 1 debt to equity ratio will remain unchanged.

Trust beneficiaries will be used in place of shareholders for the purpose of determining whether a person is a specified non-resident in respect of the trust and, therefore, whether a debt owing to that person is included in the trust’s outstanding debt to specified non-residents. The current rules dealing with rights to acquire shares in determining who is a specified shareholder will be modified to address discretionary powers.

Where interest expense of a trust is not deductible as a result of the application of the thin capitalization rules, the trust will be entitled to designate the non-deductible interest as a payment of income of the trust to a non-resident beneficiary (i.e., the recipient of the non-deductible interest). In such a case, the trust will be able to deduct the designated payment in computing its income, but the designated payment will be subject to non-resident withholding tax under Part XIII of the Act and potentially tax under Part XII.2, depending on the character of the income earned by the trust.

The thin capitalization rules apply to partnerships in which a Canadian resident trust is a member. As with debt owed directly by the trust, where these rules result in an amount being included in computing the income of a trust, the trust is entitled to designate the included amount as having been paid to a non-resident beneficiary as income of the trust.

Since some trusts may not have complete historical information, any trust that exists on March 21, 2013 are able to elect to determine the amount of its equity for thin capitalization purposes as at March 21, 2013 based on the fair market value of its assets less the amount of its liabilities. Each beneficiary of the trust would then be considered to have made a contribution to the trust equal to the beneficiary’s share (determined by reference to the relative fair market value of their beneficial interest in the trust) of this deemed trust equity. Contributions to the trust, tax paid earnings of the trust and distributions from the trust on or after March 21, 2013 would then increase or decrease (as appropriate) trust equity for thin capitalization purposes.

This measure applies to tax years that begin after 2013 and applies with respect to existing as well as new borrowings.

Non-resident trusts

Since a Canadian branch is not a separate person from the non-resident corporation or trust, the branch does not have shareholders or equity for purposes of the thin capitalization rules. Therefore, the thin capitalization rules for non-resident corporations and trusts will differ from the rules for Canadian-resident corporations in certain respects. For example, a debt-to-asset ratio of 3-to-5 will be used, which parallels the 1.5-to-1 debt-to-equity ratio used for Canadian-resident corporations.

A loan that is used in a Canadian branch of a non-resident corporation or trust will be an outstanding debt to a specified non-resident for thin capitalization purposes if it is a loan from a non-resident who does not deal at arm’s length with the non-resident corporation or trust.

A non-resident corporation or trust that earns rental income from certain Canadian properties may elect to be taxed on its net income under Part I rather than being subject to non-resident withholding tax under Part XIII on its gross rental income. The election allows the non-resident to compute its taxable income as if it were a resident of Canada, with such modifications to the tax rules as the circumstances require. Where an election is made, the thin capitalization rules for non-resident corporations and trusts, rather than those for Canadian residents, will apply in computing the non-resident’s Part I tax liability.

The thin capitalization rules apply to partnerships in which a non-resident corporation or trust is a member. Any income inclusion for a non-resident partner that arises as a consequence of the application of the thin capitalization rules is deemed to have the same character as the income against which the partnership’s interest deduction is applied.

This measure applies to tax years that begin after 2013 and applies with respect to existing as well as new borrowings.

Lines 6, 7, and 8 – Business, farming or fishing, and rental income

Enter on the appropriate lines, the trust's gross and net income or loss from business, farming, fishing, and rentals. If the amount is a loss, report it in brackets. If the trust is a member of a partnership, enter the partnership's total gross income and the trust's share of the partnership's net income or loss. Send us the appropriate forms or statements.

If a trust (other than a graduated rate estate) operates a business with a tax year-end other than December 31, special rules apply for calculating income. For more information, see Guide RC4015, Reconciliation of Business Income for Tax Purposes, to calculate the income to report.

You have to follow certain rules when reporting business, farming, fishing, and rental income. The following publications contain more information and the forms you may need to calculate the trust's income:

• Guide T4002, Self-employed Business, Professional Commission, Farming, and Fishing Income (Form T2125, Statement of Business or Professional Activities, Form T2042, Statement of Farming Activities, and Form T2121, Statement of Fishing Activities).
• Guide T4036, Rental Income (Form T776, Statement of Real Estate Rentals).

If the trust is a member of the AgriInvest Fund 2, call 1-866-367-8506 to find out which form you should use to report farming income.

Line 9 – AgriInvest Fund 2 payments

Use the calculation in this section to report all amounts received, and those deemed to have been received by the trust out of its AgriInvest Fund 2. This fund is the portion of a farm producer’s net income stabilization account that comes from third party sources, such as interest, bonuses, and government contributions.
The trust should receive an AGR-1 slip, Statement of Farm-Support Payments, (AgriInvest Fund 2 amounts are reported in Box 18) for all farm support-programs from which it received payments of more than $100. These include programs administered by the federal, provincial, territorial, and municipal governments, and producer associations. Participants in the Agri-Quebec program must also include in income, any amounts withdrawn from their Agri-Quebec Fonds 2. The trust should receive an RL-21 slip, Farm Support Payments (Agri-Quebec Fonds 2 amounts are reported in Box D).

An AgriInvest Fund 2 amount can be transferred to a testamentary post 1971 spousal or common law partner trust when the settlor dies. If the beneficiary spouse or common law partner dies, the trustee has to report a deemed payment on the day the beneficiary spouse or common law partner dies. The deemed payment is equal to the fund’s balance at the end of the day of death. The rules related to the death of a beneficiary of a spousal or similar trust have been amended in 2016. For more information, see Deemed disposition.

The trust has to report on line 9, the amount, if any, determined by the following calculation:

A – (B – C)

where:

A = the amount paid in the year out of the program (or deemed to have been paid out of the AgriInvest Fund 2, such as on the death of the beneficiary spouse or common-law partner)

B = the total of all amounts previously deemed to have been paid out of the AgriInvest Fund 2 to the trust, or to the beneficiary spouse or common-law partner, or out of another person's AgriInvest Fund 2 on being transferred to the trust

C = the total of all amounts previously applied to reduce income out of the AgriInvest Fund 2

Make separate calculations for each amount either paid or deemed paid.

AgriInvest Fund 2 payments are taxable in the trust. They cannot be allocated to beneficiaries, except for:

• amounts that relate to payments received by a testamentary spousal or common-law partner trust while the beneficiary spouse or common-law partner was still alive
• amounts received by a communal organization

Use the space below line 9 to show any of the amounts on that line relating to payments received by the beneficiary spouse or common-law partner while they were, or are still alive, or by a communal organization.

For more information, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Line 10 – Deemed dispositions income or losses

Enter the trust's total income or losses resulting from deemed dispositions from line 42 of Form T1055, Summary of Deemed Dispositions (2002 and later tax years). For more information, see Deemed disposition.

Line 11 – Other income ▲

Enter the total income the trust received in the tax year that is not included elsewhere on the T3 return or schedules, such as:

• death benefits under the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
• royalties (do not include Crown royalties in income)
• commissions
• retiring allowances, unless this amount is reported by a beneficiary, or reported in the retired person's income for the year of death as a right or thing (for more information, see Income Tax Folio S2-F1-C2, Retiring Allowances)
• certain employment-related income (for more information, see Guide T4011, Preparing Returns for Deceased Persons)
• federal, provincial, or territorial government COVID-19 assistance, such as the Canada Emergency Wage Subsidy (CEWS) if the trust was qualified as an eligible employer

Death benefit – Other than CPP or QPP

A death benefit is an amount for a deceased person's employment service. This amount is shown in box 106 of a T4A slip. If a death benefit is to be taxed in the trust according to the provisions of the trust document, you may be able to exclude up to $10,000 of the amount from the trust's income.

If no one other than a trust received a death benefit, report the amount that is more than $10,000. Even if the trust did not receive all of the death benefits in one year, the total tax-free amount for all years cannot exceed $10,000. To find out what to report if anyone else received a death benefit for the same person, see archived Interpretation Bulletin IT-508R, Death Benefits.

Send us a copy  of the T4A slip, or a statement from the deceased person's employer that identifies the payment as a death benefit.

Registered retirement savings plan (RRSP)

A trust may be entitled to income earned by an RRSP after the death of the only or last annuitant. Usually, this income is shown on a T5 or T4RSP slip issued to the estate. Include this amount on line 11 of the T3 return. Generally, amounts deemed received on death or as a refund of premiums should not be included.

For more information on taxable benefits from matured and unmatured RRSPs, see Guide T4040, RRSPs and Other Registered Plans for Retirement, Guide T4011, Preparing Returns for Deceased Persons and archived Interpretation Bulletin IT-500R, Registered Retirement Savings Plans – Death of an Annuitant.

Step 3 – Calculating net income: Lines 13 to 31

Line 14 – Carrying charges and interest expenses ▲ 

Enter the total carrying charges from line 17 of Schedule 8. For more information, see Lines 13 to 17 – Carrying charges and interest expenses.

Lines 15 to 17 – Trustee fees

Trustee, executor, and liquidator fees include:

• fees paid for certain investment advice (for more information, see archived Interpretation Bulletin IT-238R2, Fees Paid to Investment Counsel)
• fees incurred to gain or produce business or property income (deducted when you calculate the trust's business or property income)
• fees for administering the trust or looking after real property (for example, a residence) used by a lifetime beneficiary of a testamentary trust (because these fees are not incurred to earn business or property income, you cannot deduct them from the income of the trust)

Whether or not these fees are deductible by the trust, they are still income to the recipient. For this reason, you have to include the total fees paid in the year on line 15.

On line 16, enter the fees that were not incurred to earn income or that were already deducted elsewhere on the T3 return.

Trustee, executor, or liquidator fees paid to a person who acts in the capacity of an executor in the course of a business are part of that individual's business income. You must report these amounts on a T4A slip. If the trust paid fees to a non-resident of Canada for services performed in Canada and the non-resident acts in the capacity of an executor in the course of a business, complete a T4A NR slip.

For more information, see Guide RC4445, T4A-NR – Payments to Non-Residents for Services Provided in Canada. Otherwise, the fee for acting as executor is income from an office. If the fees paid are $500 or more, you have to prepare a T4 slip for that individual. The individual reports these amounts as income from an office, even if they do not receive a T4 slip. For more information, see Guide RC4120, Employers' Guide – Filing the T4 Slip and Summary.

Line 18 – Allowable business investment losses (ABIL)

If the trust had a business investment loss, you can deduct a part of that loss from income. We call the deductible portion an ABIL. It results from the actual or deemed disposition of certain capital properties. This can happen if the trust has disposed of, or is deemed to dispose of, one of the following to a person with whom it deals at arm's length:

• a share or debt of a small business corporation
• a bad debt owed to it by a small business corporation

For more information, see Guide T4037, Capital Gains.

You can deduct the ABIL from the trust's other sources of income for the year. If the ABIL is more than the other sources of income for the year, the difference is a non-capital loss for the year. For more information, see Line 33 – Non-capital losses of other years.

If you cannot deduct the ABIL as a non-capital loss within the allowed time frame, the unapplied part becomes a net capital loss in the 11th year. You can then use it to reduce the trust's taxable capital gains in the 11th year or any following year.

Reduction in business investment loss – If the trust designated part or all of its eligible taxable capital gains for the purpose of the capital gains deduction to a beneficiary in a previous year, you have to reduce the business investment loss for the current year.

Use the chart below to calculate the reduction in business investment loss. If the trust had more than one business investment loss in the year, use this chart to calculate the total reduction.

For more information, see Income Tax Folio S4-F8-C1, Business Investment Losses.

Allowable Business Investment Loss and Reduction

You have to adjust the amount of eligible taxable capital gains on lines 1 to 7, because they were included in income at different rates in previous years.

Line 19 – Other deductions from total income

Generally, you can deduct expenses if they were paid to earn income for the trust. Expenses include legal, accounting, and management fees. You can also deduct the fees paid for advice or assistance to file an objection or an appeal to an assessment or decision under the Act (although you have to reduce the claim by any award or reimbursement you received for such expenses).

Do not deduct the following:

• outlays and expenses that apply to the capital assets of the trust (see Outlays and expenses)
• personal expenses of the beneficiaries or trustees, such as funeral expenses or probate fees
• any amounts paid to beneficiaries

Line 22 – Upkeep, maintenance, and taxes of a property used or occupied by a beneficiary

You may have claimed expenses on the T3 return that relate to the upkeep, maintenance, and taxes on a property used by a beneficiary. You may have claimed these expenses on a financial statement, such as a rental statement. Generally, if these amounts were paid out of the income of the trust according to the trust document, the beneficiary is required to include these amounts in income in the year they were paid. Therefore, you have to report these benefits as income on the beneficiary's T3 slip, and you will deduct them again from the trust's income on line 28. To offset this "double-deduction" of the same expenses, you have to add these amounts back into the trust's income on line 22.

Provide details of the amount entered on this line, including the nature and amount of each expense, and where on the return or financial statement these expenses have been claimed.

Line 23 – Value of other benefits to a beneficiary

You may have paid benefits, such as amounts for personal or living expenses, from the trust to a beneficiary. The beneficiary has to include the value of these benefits in income in the year they were paid, unless the value:

• is already included in calculating the beneficiary's income for the year
• has been used to reduce the adjusted cost base of the beneficiary's interest in the trust

Enter on line 23, the amount of these benefits that were included as income on the beneficiary's T3 slip.

Because you have to deduct the value of the benefits as income allocations and designations to beneficiaries on line 28, and the trust cannot deduct this amount, you have to add it back into the trust's income by including the amount on line 23. Provide details of the amount entered on this line, including the nature and amount of each benefit.

Lines 26, 27, and 28 – Total income allocations and designations to beneficiaries ▲

Generally, a trust receives income and pays it to the beneficiaries according to the terms of a will or trust document. We call this allocating income. In most cases, you enter the income on the T3 return in Step 2, then enter it on line 26 in Step 3, so the trust does not pay tax on the income. The beneficiary then has to report the income on their return. For more information, see Schedule 9 – Income Allocations and Designations to Beneficiaries.

In some cases, income that is allocated to a beneficiary may be taxed on the trust's return, instead of on the beneficiary's return. In other cases, income that is usually reported on the trust's T3 return may instead be reported on the beneficiary's T1 return. For more information, see Exceptions and limits to income allocations.

On line 26, enter the amounts paid or payable to beneficiaries in the current year, including any amount designated by a preferred beneficiary election. On line 27, subtract the amounts claimed under subsections 104(13.1) and 104 (13.2). Enter the result on line 28.

For more information, see Income to be taxed in the trust.

Step 4 – Calculating taxable income: Lines 32 to 43

Losses of other years – If you are claiming a loss from other years, provide a continuity statement of the loss balances.

Be sure the statement includes the year the loss was incurred, the amounts applied in previous years, and the balance remaining at the beginning of the current year.

If the trust is claiming more than one loss, or if a claim needs more explanation, send us a note providing the details.

Loss trading – Rules for trusts

The loss streaming rules generally apply to limit a corporation’s trading of certain tax attributes (for example, non-capital losses, net capital losses, farm losses, and unused investment tax credits) where a person or group of persons acquires control of the corporation. The loss-streaming and related rules apply, with appropriate modifications, to a trust that is subject to a loss restriction event.

A trust will be subject to a loss restriction event when a person or partnership becomes a majority-interest beneficiary of the trust or a group becomes a majority-interest group of beneficiaries of the trust. The concepts of majority-interest beneficiary and majority-interest group of beneficiaries will apply as they do under the existing income tax provisions for affiliated persons, with appropriate modifications. In general, under the affiliated persons provisions, a majority-interest beneficiary of a trust is a beneficiary who, together with persons and partnerships with which the beneficiary is affiliated, has a beneficial interest in the trust’s income or capital with a fair market value that exceeds 50 per cent of the fair market value of all the beneficial interests in income or capital, respectively, in the trust. Additional rules apply to beneficiaries who have discretionary interests.

The rules that deem certain transactions or events to involve (or not involve) an acquisition of control of a corporation are applicable, with appropriate modifications, in determining whether a trust is subject to a loss restriction event under section 251.2. For example, rules similar to the continuity of ownership rules that deem a corporate acquisition of control not to occur in certain circumstances involving the death of a shareholder, or involving transactions within certain groups of shareholders, will also apply in the context of trusts and their beneficiaries.

Many of the typical transactions or events involving changes in the beneficiaries of a personal (that is, family) trust will not, because of the continuity of ownership rules, result in the trust being subject to a loss restriction event.

These measures, apply to transactions that occur after March 20, 2013.

The acquisition of equity in certain types of investment trusts will not be treated as a loss restriction event of the trusts if certain conditions are met. Certain relieving measures exist where a trust is subject to a loss restriction event; for example, the filing due date of the trust’s T3 return and issuance of T3 slips, and balance due date have been extended in respect of a tax year that is deemed to end before the loss restriction event.

Line 33 – Non-capital losses of other years

A non-capital loss could arise if the trust had a loss from business or property in a year, and it was more than the trust's income from all sources in that year.

The tax year in which the non-capital loss was incurred will affect the extent to which you can carry over the unused portion. You can carry over the unused portion of a loss that was incurred in a tax year ending:

• on or after January 1, 2006, back 3 years and forward 20 years
• after March 22, 2004, and before January 1, 2006, back 3 years and forward 10 years
• before March 23, 2004, back 3 years and forward 7 years

If the trust has an unused non-capital loss from a previous year, you can use it to reduce taxable income for the current year. Enter this amount on line 33.

For information on how to carry back an unused non-capital loss, see Form T3A, Request for Loss Carryback by a Trust.

Farming and fishing losses – If the trust had a farming or fishing loss from a previous year, see Lines 35 to 40 – Other deductions to arrive at taxable income.

Line 34 – Net capital losses of other years

Generally, if the trust's allowable capital losses are more than its taxable capital gains in a year, the difference is a net capital loss for that year. You can use the net capital loss to reduce the trust's taxable capital gains in any of the three preceding years or in any future year.

Within certain limits, you can deduct all or a portion of the trust's net capital losses of other years that have not already been claimed.

For more information, see Guide T4037, Capital Gains.

Listed personal property losses – Losses on listed personal property (LPP) can be applied only against LPP gains. Claim the unused portion of an LPP loss from a previous year against a current-year LPP gain on line 8 of Schedule 1, or on line 8 of Form T1055, Summary of Deemed Dispositions (2002 and later tax years), if applicable. For more information, see Lines 7 to 9 – Listed personal property.

The unused portion of an LPP loss can be carried back three years and forward seven years, and applied against LPP gains in those years.

For information on how to carry back an unused net capital loss or an LPP loss, see the next section.

Form T3A, Request for Loss Carryback by a Trust

Use this form to carry an unused loss back to a previous year. You have to make your request on or before the due date of the T3 return for the year in which the trust incurred the loss. You can file the completed form with the current year’s T3 return or, where applicable, file it together with the Form T3-ADJ, T3 Adjustment Request.

If the loss was not deducted fully in a previous year, keep a schedule of the unused portion so you can deduct it in future years. Always apply the oldest loss within a class of losses first. For example, apply a 2020 non-capital loss before a 2021 non-capital loss.

A non-capital loss carryback is used to reduce the taxable income of the trust in a previous year. A net capital loss carryback is deductible in computing a trust’s taxable income for a previous tax year only to the extent of the trust’s taxable capital gains in that previous year.

If you allocated income or designated taxable capital gains to beneficiaries in a previous year and you subsequently carry back a loss to that year, the trust may make a late subsection 104(13.1) or (13.2) designation only where the application of the loss results in nil taxable income for the trust.

Filings to amend the tax position of the trust and the beneficiary are as follows:

• the trust would file Form T3A, Request for Loss Carryback by a Trust in connection with the loss year to request the loss be carried back to the previous year
• the trust would file Form T3-ADJ, T3 Adjustment Request for the previous year to reflect a late subsection 104(13.1) or (13.2) designation so as to amend the trust’s T3 return
• the trust would issue amended T3 slips to the beneficiary for that previous year, reducing the income allocated
• the beneficiaries would file a Form T1-ADJ, T1 Adjustment Request to reflect the revised T3 slip and to amend the T1 return

The CRA will only reassess beneficiaries’ returns if the tax years to which they relate and the tax year of the trust to which the loss will be applied are not statute-barred.

The trust must file Forms T3A and T3-ADJ together as they must be processed concurrently.

If you apply a net capital loss carryback, a non-capital loss may be increased or created if the loss was previously used to reduce the amount of taxable capital gains in the year of the carryback.

For more information, see archived Interpretation Bulletin IT-232R3, Losses – Their Deductibility in the Loss Year or in Other Years.

Lines 35 to 40 – Other deductions to arrive at taxable income

Enter other deductions, such as:

• previous year limited partnership, farming, or fishing losses (see Note)
• the $2,000 deduction allowed to a non profit organization reporting income from property (subparagraph 149(5)(f)(i) of the Act)
• the amount of foreign income reported that is exempt from tax in Canada because of a tax treaty or convention (identify the exempt income amount, and the treaty or convention that applies)

Step 5 – Summary of tax and credits: Lines 44 to 73

Complete the last page including the parts “Name and address of person or company who prepared this return” and “Certification”.

Line 44 – Total federal tax payable▲

Enter the federal tax payable from line 33 of Schedule 11, or line 54 of Schedule 12.

Line 45 – Provincial or territorial tax payable ▲

For information on which provincial or territorial form to use, see Provincial and territorial income tax.

Line 48 – Tax paid by instalments ▲

Enter the total instalment payments made by the trust. If the account number on the trust's receipt is not the same as the one on page 1 of the return, enter the account number from the receipt to the right of line 48. If you received a refund of all or part of an instalment, do not include this amount on line 48.

Tax instalments

For tax years before 2016, testamentary trusts were exempted from the tax instalment rules and therefore were required to pay any tax owing within 90 days after the end of the tax year. For 2016 and subsequent tax years, only a graduated rate estate is exempt from making the tax instalments. However, consistent with current administrative practices, the CRA will continue to not assess penalties or interest where a trust fails to make sufficient instalment payments.

Lines C, D and 49 – Total tax deducted ▲

If tax was withheld on any income earned by the trust, enter the amount of tax withheld on line C. Send us information slips if they are available. If an information slip is not available, send us a statement from the issuer, indicating the income reported and the tax withheld. Do not allocate the tax that was withheld to the beneficiaries.

Transfer to Quebec – If the trust was resident in Quebec and earned income outside that province, tax may have been withheld for a province or territory other than Quebec. You can transfer up to 45% of this amount to the province of Quebec. Enter this amount on line D. If this does not apply to you, enter "0" on line D.

Subtract the transferred amount from total tax deducted, and enter the result on line 49.

Line 52 – Capital gains refund

This refund is available only to a mutual fund trust that has refundable capital gains tax on hand at the end of the year. To calculate the refund, complete Form T184, Capital Gains Refund to a Mutual Fund Trust.

Line 53 – Part XII.2 tax credit

If the trust is the beneficiary of another trust and received a T3 slip from that trust with an amount in box 38, enter that amount on line 53.

Line 69 – Total other credits

Certain provincial or territorial tax credits are available to a trust (lines 54 to 68) if the trust meets both of the following conditions:

• it was a resident of the province or territory at the end of the tax year
• it incurred eligible expenditures related to certain activities

You can find specific information on the following forms:

• Form T1129, Newfoundland and Labrador Research and Development Tax Credit (Individuals) (for the Newfoundland and Labrador research and development tax credit)
• Form T1232, Yukon Research and Development Tax Credit (Individuals) (for the Yukon research and development tax credit)
• Form T88, British Columbia Mining Exploration Tax Credit (Individuals) (for the British Columbia mining exploration tax credit)

Use the appropriate form to calculate the tax credit. Send us the form with the trust's return.

In the case of the research and development tax credits, the trust can designate some or all of these credits to beneficiaries of the trust. Subtract the amount designated to beneficiaries from the credit calculated on the form. Enter the result on the corresponding credit line of the trust's return.

Canadian journalism labour tax credit

A trust can claim the Canadian journalism tax credit, once designated by the Minister as a qualified Canadian journalism organization (QCJO), provided the trust is one of the following:

• A qualifying journal organization (QJO)
• A member of a partnership (other than a specified member of the partnership) that is a QJO

• a copy of the letter from the CRA designating the organization to be a QCJO
• the period for which the organization was a QJO in the tax year
• any amount the organization received from the Aid to Publishers component of the Canada Periodical Fund in the tax year
• a letter that states the name of your organization, your trust account number, the tax year for which you are claiming the credit, and the dollar amount of the tax credit you are claiming
• a schedule showing all of the following information in respect of each eligible newsroom employee:
  • the employee’s name;
  • the employee’s social insurance number (SIN);
  • the salary or wages payable to the employee for the portion of the tax year (on or after January 1, 2019) throughout which your organization was a QJO; 
  • the amount of any assistance received in the tax year in respect of the employee that had not been repaid before the end of the year pursuant to a legal obligation to do so.

Send the supporting information with your T3 return to your tax centre.

For more information on the requirements that must be met to be a QCJO and a QJO as well as information on calculating the Canadian journalism labour tax credit, go to Supporting Canadian journalism.

Return of fuel charge proceeds to farmers tax credit

This refundable tax credit provides a return of a portion of the fuel charge proceeds from the federal carbon pollution pricing system directly to farming businesses in provinces that do not currently have a system that meets the federal requirements. These designated provinces are Alberta, Manitoba, Ontario, and Saskatchewan.

Effective for 2023 and subsequent tax years, the fuel charge program has been expanded to include four additional designated provinces; New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.

This credit is considered to be government assistance that you received in the year and is taxable to you. Include in your income the amount of the credit in the same tax year in which you claimed the credit.

Trusts claiming this credit on line 64, including if they are allocated a credit by a partnership, should complete the calculation using form T2043 and send it with their T3 Trust Income Tax and Information return.

For more information, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income  and Form T2043, Return of Fuel Charge Proceeds to Farmers Tax Credit.

British Columbia clean building tax credit (Extended to 2027)

The clean buildings tax credit is a refundable income tax credit for qualifying retrofits that improve the energy efficiency of eligible commercial and multi-unit residential buildings with four or more units. The retrofit must improve the energy efficiency of an eligible building and meet energy-use targets. The credit amount is 5 percent of qualifying expenditures paid for the retrofit less:

• expenses claimed by any other taxpayer
• any amount received or receivable as under an assistance program in respect of the qualifying expenditures, and
• any amount provided as a forgivable loan that was designed to provide assistance with the financing or cost of the alteration or renovation if it has not been repaid under a legal obligation to do so.

You must be a resident of British Columbia or have income allocated to British Columbia at the end of the year that you are claiming the credit. The retrofit must be certified by the British Columbia Ministry of Finance before you may claim this credit.

Claim this credit on your income tax return for the year following the tax year that the retrofit is completed. You can claim the credit no later than 18 months after the end of the tax year that follows the tax year in which a retrofit was completed.

The retrofit must be both completed before April 1, 2026, and an application for certification must be filed to the British Columbia Ministry of Finance before April 1, 2027, in order to be certified.

Qualifying expenditures are expenditures that are directly attributable to a qualifying retrofit. You must make or incur the expenditures under the terms of an agreement entered into after February 22, 2022 and paid before April 1, 2025.

Claim this credit on line 65 of the T3 Trust Income Tax and Information return. For more information on Clean buildings tax credit, go to Clean buildings tax credit.

Yukon business carbon price rebate

Trust can claim the Yukon business carbon rebate. Complete Part 2 of Schedule YT(S14), Yukon Government Carbon Price Rebate, and enter this amount on line 67 of the T3 Return. If you are claiming this rebate for the tax years 2019, 2020 and 2021, you will need to send a T3-ADJ Adjustment Request, requesting an adjustment to line 67.

If you are claiming this rebate for the tax years 2020, 2021 and 2022, you will need to send a T3-ADJ Adjustment Request, requesting an adjustment to line 67.

The Yukon business carbon price rebate includes the general business carbon price rebate and the mining business carbon price rebate. You may be able to claim this rebate if, in 2023, you operated a business or mining business in Yukon or you earned income from a rental property while you lived in Yukon.

For more information, see Yukon tax information for 2023.

Yukon mining carbon price rebate

The mining carbon price rebate is a refundable credit for qualifying clean technology assets that reduce fossil fuel consumption.

Complete Part 2 of Schedule YT(S14), Yukon Government Carbon Price Rebate, and enter this amount on line 68 of the T3 Return.

Supporting Documents: If you are filing a paper return, attach your Schedule YT(S14).

For more information, see Yukon tax information for 2023.

Line 71– Balance owing or refund▲ 

The balance owing or refund is the difference between the total taxes payable on line 47 and the total credits on line 70. Generally, a difference that is $2 or less does not have to be paid, nor will it be refunded.

Line 72 – Amount enclosed ▲

Enter the amount of the payment you are sending the CRA with your tax return. For more information see Payment options.

Line 73– Refund code ▲

If the trust is entitled to a refund, enter one of the following codes in the refund code box:

We consider the credit to have been received on the date we assess your return. First, we will apply a credit to any outstanding balance. Then, we will direct any amount left over according to the code you enter. If you do not enter a code, we will refund the credit.

Name and address of person or company who prepared this return

Complete this part if someone other than the trustee, executor, liquidator, or administrator prepared this return.

Certification ▲

The trustee, executor, liquidator, or administrator of the trust has to complete and sign this part.

Chapter 3 – Trust schedules and forms

Schedule 1 – Dispositions of Capital Property

If the trust disposed of capital property in the year, see Guide T4037, Capital Gains, for the general rules regarding capital gains and losses. We explain the rules that relate to trusts in this section.

Complete Schedule 1 and file it with the T3 return if the trust had dispositions of capital property during the year. Do not include any deemed dispositions that are reported on Form T1055, Summary of Deemed Dispositions (2002 and later tax years).

Transfer any taxable capital gains from line 24 of Schedule 1 to line 1 of the return.

A disposition of capital property includes any of the following:

• the sale of property
• the sale of the principal residence
• the distribution or exchange of property
• the making of a gift
• a redemption of shares
• a debt settlement
• a theft
• the destruction of property

Certain gifts – zero inclusion rate

Generally, a trust’s taxable capital gain from the disposition of capital property is 50% of the trust’s capital gain with certain exceptions.

If the trust donated certain types of capital property to a registered charity or other qualified donee, the trust may not have to include in its income any amount of capital gain realized on such gifts. The trust may be entitled to an inclusion rate of zero on any capital gain realized on such gifts.

Donated capital property, where an inclusion rate of zero may apply, includes all of the following:

• a share, debt obligation, or right listed on a designated stock exchange
• a share of the capital stock of a mutual fund corporation
• a unit of a mutual fund trust
• an interest in a related segregated fund trust 
• a prescribed debt obligation
• certified ecologically sensitive land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, or a personal servitude where certain conditions are met) gifted to certain qualified donees other than private foundations. For more information, see "Gifts of ecologically sensitive land" in Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

If there is no advantage in respect of the gift, the full amount of the capital gain realized on the gift is eligible for an inclusion rate of zero. However, if there is an advantage, only part of the capital gain is eligible for the inclusion rate of zero. The remainder is subject to an inclusion rate of 50%.

The zero inclusion rate may also apply to a gift of a capital property included in the previous list if the gift is made to a qualified donee by a GRE (or by a former GRE). For such gifts by a GRE (or former GRE) the donated property must be property that was acquired by the estate on and as a consequence of the death of the individual (or property that was substituted for such property). In such circumstances, the zero inclusion rate will apply to a capital gain realized on the deemed disposition of the property immediately before the individual’s death and reported on the individual’s final return as well as to a capital gain realized by the estate on the transfer of the property to the qualified donee.

For more information, see T3 Schedule 1A, Capital Gains on Gifts of Certain Capital Property, section "Capital gains realized on gifts of certain capital property" in Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

Distribution of property to beneficiaries

If a personal trust distributes property to a beneficiary (to settle in whole or in part the beneficiary's capital interest in the trust), send us a statement that includes all of the following information about the distributed property:

• the name and address of the recipient or recipients
• a description of the property
• the fair market value (FMV) on the day it is distributed
• the cost amount on the day it is distributed

For information regarding the distribution of property to a non-resident beneficiary, see Capital dispositions – Rules for trusts.

Graduated rate estate elections (losses)

If you are a legal representative administering the graduated rate estate of a deceased person, you may:

• elect under 164(6) to treat certain capital losses and terminal losses, arising in the first tax year of the deceased person’s graduated rate estate, as losses of the deceased person for that person’s final tax year
• elect under 164(6.1) to carryback certain amounts relating to employee stock options, arising in the first tax year of the deceased person’s graduated rate estate, to be deducted in computing the deceased person’s income for that person’s final tax year

These elections apply only to the first tax year of a deceased person’s estate. The elections do not affect the return of the deceased person for any year before the year of death.

Due date of election and amended final T1 return

In addition to filing the election you are also required to file an amended final T1 return of the deceased person to give effect to the rules. The application of the losses to the deceased person’s final tax year cannot be processed without this corresponding amended final T1 return.

Both the election and amended final T1 return must be filed by the later of:

• the filing due date of the deceased person’s final T1 return that the legal representative is required to file or has elected to file
• the filing due date for the estate’s T3 return for its first tax year

When filing the amended T1 return, you must clearly identify the amended final T1 return of the deceased person as a 164(6) election or a 164(6.1) election.

164(6) election

Generally, you can make this election for:

• all or any portion of the capital loss (to the extent the graduated rate estate’s capital losses exceed its capital gains) resulting from the disposition of the graduated rate estate’s capital property as reported on Schedule 1
  • the amount of losses available to be carried back to the final T1 Individual return is the amount of losses before the inclusion rate is applied
• all or any portion of the terminal loss (not exceeding the total of the graduated rate estate’s non-capital loss and farm loss before the election) resulting from the disposition of all of the depreciable property of a prescribed class of the graduated rate estate

If you are making an election under 164(6) for the graduated rate estate, send us the following:

• a letter indicating that you are making an election under 164(6) and providing all of the following information:
  • the amount of the capital loss you elect to be a capital loss of the deceased person
  • the amount of the terminal loss you elect to be deductible in computing the income of the deceased person
• a schedule with details of the capital loss
• a schedule with the details of the terminal loss and a statement of the amounts that would have been the non-capital loss and the farm loss of the estate for its first tax year had the election not been made

The graduated rate estate cannot claim a loss that you have elected to transfer to the deceased person's final T1 return. However, you have to report the dispositions of the estate property on Schedule 1. If the total is a loss, enter the amount elected under subsection 164(6) on line 20.

164(6.1) election

This election applies to certain unexercised employee security options held by a person, at the time of death, in respect of which a benefit has been included in the person’s income under paragraph 7(1)I for the tax year in which the person died. Generally, where the value of those unexercised options subsequently declines and the options expired or were exercised or disposed of in the first year of the estate, the deceased’s legal representative may elect to treat an amount determined under 164(6.1) as a loss of the deceased from employment for the year in which the person died.

You can only make this election for employee security options that expired, or that you exercised, or disposed of in the first tax year of the graduated rate estate.

If you are making an election under 164(6.1) for the graduated rate estate, send us the following:

• a letter indicating that you are making an election under 164(6.1) and providing all of the following information:
  • the amount of the benefit included in the deceased person’s income for the tax year in which the person died
  • ­the amount, if any, by which the value of the right immediately before it was exercised or disposed of exceeds the amount, if any, the deceased person paid to acquire the right
  • the amount of the loss you elect to be a loss of the deceased taxpayer from employment in the year in which the taxpayer died

Use the following calculation to determine the amount that can be carried back to the deceased person's final T1 return:

A – (B + C)

where:

A = the deemed benefit for the option included on the deceased person's final return

B = the amount by which the value of the option immediately before it expired, was exercised, or disposed of, is more than the amount the deceased person paid to acquire it

C = the amount by which A is more than B, if a security option deduction for this option was claimed on the deceased person's final return, multiplied by 50%

If you make this election, reduce the trust's adjusted cost base of the option by A minus B, without considering C.

Capital dispositions – Rules for trusts

Affiliated persons

A trust is considered to be affiliated with its majority interest beneficiary and any person who is affiliated with such a beneficiary. As a result, the rules that apply to affiliated persons may apply to a trust and its beneficiaries, settlors, or contributors. For more information, call 1-800-959-8281.

Distribution to non-resident beneficiary

A trust that distributes property to a non-resident beneficiary in satisfaction of all or part of the beneficiary's capital interest in the trust, is deemed to have disposed of such property for proceeds equal to the property's fair market value (FMV) at that time.

This rule does not apply to property that meets any of the following conditions:

• a share of the capital stock of a non-resident owned investment corporation
• real or immovable property situated in Canada, a Canadian resource property or a Canadian timber resource property
• capital property used in, Class 14.1 (eligible capital property before January 1, 2017) in respect of or property described in the inventory of, a business carried on by the taxpayer through a permanent establishment in Canada at the particular time
• an excluded right or interest of the taxpayer 

And the conditions in subsection 107(2) are met and subsection 107(4.1) is not applicable.

Trust emigration

A trust that ceases to be resident in Canada is deemed to have disposed of all property, including certain taxable Canadian property, for proceeds equal to the property's FMV at that time, and reacquired the property, at the same value, immediately thereafter.

These rules do not apply to any of the following properties, among others:

• real or immovable property situated in Canada, a Canadian resource property, or a Canadian timber resource property
• capital property used in, Class 14.1 (eligible capital property before January 1, 2017) in respect of or property described in the inventory of, a business carried on by the taxpayer through a permanent establishment in Canada at the particular time
• pension or other similar rights or interests
• payments out of an AgriInvest Fund 2

The trust or beneficiary can defer paying tax resulting from the deemed disposition by providing acceptable security. To arrange security, call 1-800-959-8281.

Trust emigration - information reporting

A trust that ceases to be resident in Canada, and that owns property with a total FMV of more than $25,000 at that time, has to file Form T1161, List of Properties by an Emigrant of Canada, with its T3 return for that year, listing each property the trust owned at that time. For the purposes of determining whether Form T1161 is required, property does not include:

• money that is legal tender in Canada and all deposits of such money
• pension or other similar rights or interests
• any item of personal-use property, with a FMV of less than $10,000 at the time the trust ceased to be a resident in Canada

Canadian cultural property

For information on dispositions of Canadian cultural property, see "Selling or donating certified Canadian cultural property" in Guide T4037, Capital Gains, archived Interpretation Bulletin IT-407, Dispositions of Cultural Property to Designated Canadian Institutions, Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.  

Proceeds of disposition

This is usually the amount that the trust received or will receive for its property. In most cases, it refers to the sale price of the property. In certain situations, the proceeds of disposition are set by rules in the Act.

Personal trust – When this kind of trust distributes property to a beneficiary, and there is a resulting disposition of all or part of the beneficiary's capital interest in the trust, we generally consider the trust to have received proceeds of disposition equal to the "cost amount" of the property. The cost amount of a capital property (other than a depreciable property) is its Adjusted cost base.

The cost amount of a depreciable property is calculated as follows:

• If the property was the only property in the class, the cost amount is the undepreciated capital cost (UCC) of the class before the distribution
• If there is more than one property in the class, the cost amount of each property is as follows:

Where a personal (or prescribed) trust distributes property to a beneficiary to settle all or part of the beneficiary's capital interest in the trust, the trust can elect under subsection 107(2.001) of the Act to not have the trust's proceeds of disposition equal to the cost amount of the property.

A subsection 107(2.001) trust election is applicable to distributions made after October 1, 1996 when:

• the trust was resident in Canada when it distributed the property;
• the property is taxable Canadian property;
• the property is property of a business carried on by the trust through a permanent establishment in Canada. This includes capital property and property described in the inventory of the business, immediately before the time of distribution.

To elect under subsection 107(2.001), the trust must send us a letter for the tax year in which the property was distributed.

The letter should include all of the following information:

• a declaration to elect under subsection 107(2.001)
• name of the trust
• trust account number
• type of trust
• trust's tax year-end date
• residency status of the trust, (resident trust or non-resident trust)
• if applicable, the date the trust became a resident of Canada in the year
• if applicable, the date the trust became a non-resident of Canada in the year
• name, address and signature of trustee making the election

If you file an election, we consider the trust, if resident in Canada, to have received proceeds of disposition equal to fair market value (FMV) of the property at the time of distribution.

Effective for distribution of property after December 20, 2002, a personal (or prescribed) trust is deemed to have disposed of property for proceeds equal to the property's FMV at the time of the distribution if both of the following conditions are met:

• at a particular time before December 21, 2002, there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to the trust
• the beneficiary is neither the particular partnership nor the particular corporation

Post-1971 spousal or common-law partner trust – When this kind of trust, whose beneficiary spouse or common-law partner is still alive, distributes property such as capital property, resource property, or land inventory to a person who is not the beneficiary spouse or common-law partner, we consider the trust to have received proceeds of disposition equal to the property's FMV.

This also applies to both of the following:

• a joint spousal or common-law partner trust that distributes property to a person who is not the settlor, beneficiary spouse or common-law partner and the settlor, beneficiary spouse or common-law partner is still alive
• an alter ego trust that distributes property to a person who is not the settlor and the settlor is still alive

Trust other than a personal trust – When this kind of trust distributes property to a beneficiary and there is a resulting disposition of all or part of the beneficiary's capital interest in the trust, we consider the trust to have received proceeds of disposition equal to the property's FMV.

For more information, see Chapter 2 in Guide T4037, Capital Gains.

Adjusted cost base (ACB)

This is usually the cost of the property plus expenses incurred to obtain it. The adjusted cost base can differ from the original cost if changes have been made to the property between the time it was acquired and the time it was sold. For more information, see Guide T4037, Capital Gains, and archived Interpretation Bulletin IT-456, Capital Property – Some Adjustments to Cost Base, and its Special Release.

Generally effective after February 27, 2004, the cost of a capital interest in a trust that is not held by the taxpayer as capital property is deemed to be equal to the cost amount used for inventory valuation purposes less the total of all returns of capital and non-taxable capital gains payable to the taxpayer in respect of the interest, prior to the disposition. At any particular time, inventory valuation is deemed to be the FMV of the capital interest plus the sum of all returns of capital and non-taxable capital gains payable before that time.

Beneficial interest in a trust – A trust may receive a T3 slip with an amount showing in box 42. Use this amount to determine the ACB of your interest in that trust. Reduce the cost of your interest by the total of the positive amounts shown in box 42 of the T3 slips received from the trust for all tax years after 2003. Also reduce it by all amounts (other than amounts received as proceeds of disposition or as a distribution of income of the trust) received from the trust before 2004. If the amount in box 42 is in brackets, it will result in an increase in the ACB. You may want to contact the trustee of the trust to determine if there are any other adjustments required in calculating the ACB of your interest. For more information on how to account for box 42 amounts, see Information Sheet RC4169, Tax Treatment of Mutual Funds for Individuals.

Property acquired before 1972

Before 1972, capital gains were not taxed. If the trust sold property acquired before 1972, you have to use special rules when calculating the capital gain or capital loss to remove any capital gains accrued before 1972. These rules are found on Form T1105, Supplementary Schedule for Dispositions of Capital Property Acquired Before 1972. Use Form T1105 to calculate the gain or loss from selling property the trust owned before 1972.

Outlays and expenses

These are amounts incurred to sell a capital property such as finder's fees, commissions, broker's fees, legal fees, and advertising costs. You can deduct outlays and expenses from the proceeds of disposition when calculating the capital gain or capital loss.

In the case of depreciable property sold at a loss, these outlays and expenses reduce the proceeds from the sale to be credited to the class. Do not claim them as deductions from the trust's income.

Lines 1 and 2 – Qualified small business corporation shares (QSBCS) and qualified farm or fishing property (QFFP)

Use these sections if you are filing a return for a personal trust reporting a capital gain or loss from the disposition of qualified small business corporation shares or qualified farm or fishing property. For more information, see Guide T4037, Capital Gains.

Do not report a loss the trust incurred in disposing of shares of, or debts owing by, a small business corporation in an arm's length transaction. For information on these types of losses, see Line 18 – Allowable business investment losses (ABIL).

Capital gains from the disposition of qualified small business corporation shares, or qualified farm or fishing property may qualify for the capital gains deduction where the personal trust is allocating and designating the eligible capital gains to a beneficiary. Complete Schedules 3 and 4, and see How to complete the T3 slip.

A share in a small business corporation is considered to be a qualified small business corporation share if all of the following conditions are met:

• at the time of disposition, it was a share of the capital stock of a small business corporation and was owned by the personal trust, or a partnership related to the personal trust
• throughout the 24 months before the disposition, only the personal trust, or a person or a partnership related to the personal trust, owned the share
• throughout that part of the 24 months immediately before the disposition, while the personal trust or person or partnership related to the personal trust owned the share, it was the share of a Canadian-controlled private corporation (CCPC), and more than 50% of the fair market value of the assets of that corporation:
  • was used mainly in an active business carried on primarily in Canada by the CCPC, or by a related corporation
  • was certain shares or debts of connected corporations
  • was a combination of the two

For the purpose of a qualified small business corporation share, a person or a partnership is related to a personal trust if it meets any of the following conditions:

• the person or partnership is a beneficiary of the personal trust
• the personal trust is a member of the partnership
• the person is a member of a partnership that is a member of another partnership and is deemed to be a member of the second partnership
• when the personal trust disposes of the shares, all the beneficiaries are related to the person from whom the personal trust acquired the shares

For more information, see "Qualified small business corporation shares" in Guide T4037, Capital Gains.

Qualified farm or fishing property of a personal trust includes any of the following property the personal trust owns:

• a share of the capital stock of a family farm or fishing corporation
• an interest in a family farm or fishing partnership
• real or immovable property, or a fishing vessel, or property included in Class 14.1 used in carrying on a farming or fishing business in Canada by either of the following:
  • an individual beneficiary (who is entitled to receive directly from the trust any income or capital of the trust), or that beneficiary's spouse or common-law partner, child, or parent
  • a family farm or fishing corporation, or a family farm or fishing partnership in which either an individual beneficiary, or the beneficiary's spouse or common-law partner, child, or parent own a share in the corporation or an interest in the partnership

Line 3 – Publicly traded shares, mutual fund units, and other shares

Use this section to report a capital gain or loss when the trust sells mutual fund units, shares, or securities that are not described in any other section of Schedule 1.

If you are deemed to have a capital gain as a result of a negative adjusted cost base (ACB), use this line to report the deemed gain. Complete the first two columns with the number of shares and the name of the fund or corporation. Enter the ACB in brackets in column 3 and the capital gain in column 5.

Line 4 – Bonds, debentures, promissory notes, crypto assets, and other similar properties

Use this section to report capital gains or losses when the trust sells these types of properties. The trust may receive Form T5008, Statement of Securities Transactions, or an account statement, showing details of the sale.

Also use this section to report capital gains or losses when the trust sells options. For information on disposing of options to sell or buy shares, see archived Interpretation Bulletin IT-96, Options Granted by Corporations to Acquire Shares, Bonds, or Debentures and by Trusts to Acquire Trust Units, and archived Interpretation Bulletin IT-479, Transactions in Securities, and its Special Release.

Line 5 – Real estate, depreciable property, and other properties

Use this section if the trust sold real estate or depreciable property.

The trust cannot have a capital loss on the disposition of depreciable property. However, it can have a terminal loss under the capital cost allowance rules. For more information, see "Real estate, depreciable property and other properties" in Guide T4037, Capital Gains.

Line 6 – Personal-use property

Use this section if the trust disposed of property used primarily for the personal use or enjoyment of a beneficiary under the trust, or any person related to the beneficiary. Personal-use property includes personal residences, cottages, automobiles, and other personal and household effects.

When you dispose of personal-use property, use both of the following rules to calculate the capital gain or loss:

• if the ACB of the property is less than $1,000, the ACB is considered to be $1,000
• if the proceeds of disposition of the property are less than $1,000, the proceeds are considered to be $1,000

If the trust disposed of personal-use property that has an ACB or proceeds of disposition of more than $1,000, there may be a capital gain or loss. Report the capital gain on Schedule 1. If there is a capital loss, you usually cannot deduct the loss in the year. For more information, see "Personal-use property" in Guide T4037, Capital Gains.

Calculate the capital gain or loss using the actual ACB and proceeds of disposition if the trust, or a person with whom the trust does not deal at arm's length, meets all of the following conditions:

• personal-use property, including listed personal property (LPP), was acquired after February 27, 2000
• circumstances suggest that acquisition of the property relates to an arrangement, plan, or scheme promoted by another person or partnership
• the property will be donated to a qualified donee

Note

See Property flipping on the next page.

Principal residence

If a personal trust acquires a principal residence, it may be exempt from tax on the capital gain on the disposition or deemed disposition of that residence. To be exempt, the residence has to qualify and be designated by the trust as its principal residence. Before December 31, 2016, a residence could usually be designated if a specified beneficiary, or that beneficiary’s spouse or common law partner, former spouse or common law partner, or child, lived in it. A specified beneficiary is one who had a beneficial interest in the trust, and who ordinarily lived, or had a spouse or common law partner, former spouse or common law partner, or child, who lived in the residence.

The types of trusts that are eligible to designate a property as a principal residence are limited to a trust that is:

• an alter ego trust, spousal or common law partner trust, joint spousal or common law partner trust, or certain trusts for the exclusive benefit of the settlor during the settlor’s lifetime (collectively referred to as “life time benefit trusts”), where the specified beneficiary of the trust for each tax year for which the trust is designating the property as its principal residence, is the settlor, spouse or common law partner or former spouse or common law partner of the settlor (as the case may be)
• a qualified disability trust, so long as, the “electing beneficiary” of the trust for the year is:
  • resident in Canada during the year
  • the specified beneficiary of the trust during the year
  • a spouse, common law partner, former spouse or common law partner or child of the settlor
• a trust, the specified beneficiary of which for the year is an individual:
  • who has not reached 18 years of age before the end of the year
  • who is resident in Canada during the year
  • one of whose parents is a settlor of the trust and either of the following conditions is met:
    • neither the mother or father of the individual is alive at the beginning of the year
    • the trust arose before the beginning of the year as a result of the death of either the mother or father of the individual
• a trust, the specified beneficiary of which for the year is a “qualifying individual” in respect of the trust under which no person other than the qualifying individual (see the definition of “qualifying individual” in “Definitions”) in respect of the trust under which no person other than the qualifying individual (beneficiary), may receive or otherwise obtain the use of, during the beneficiary’s lifetime, any of the income or capital of the trust. The trustees must be required to consider the needs of the beneficiary (including the comfort, care and maintenance of the beneficiary) in determining whether to pay, or not to pay, an amount to the beneficiary.

Special transitional rules apply to make sure a trust that owned the property before 2017, which no longer qualifies to designate the property as its principal residence as a result of these new requirements, may continue to benefit from the principal residence deduction for the gains accrued until December 31, 2016, where the trust meets all of the following conditions:

• was otherwise eligible to claim a principal residence deduction for a tax year that begins before 2017
• owned the property, jointly with another person or otherwise, at the end of 2016, and owns it continuously from January 1, 2017 until the disposition
• disposed of the property after 2016

A personal trust can only designate one property as a principal residence. Also, the specified beneficiary cannot designate any other property as a principal residence. Make the trust’s designation on Form T1079, Designation of a Property as a Principal Residence by a Personal Trust. You have to file this form with the trust’s T3 return for the year in which the disposition or deemed disposition occurs.

When a personal trust’s principal residence is distributed to a beneficiary, the trust can elect to have a deemed disposition of the principal residence at its fair market value (FMV). When you make this election on the trust’s return for the year of distribution, you may be able to claim the principal residence exemption to reduce the gain, if any, from the trust’s deemed disposition. The beneficiary will then acquire the property at its FMV.

For more information, see Form T1079 and Income Tax Folio S1-F3-C2, Principal Residence.

Property Flipping

For dispositions after 2022, if a trust owned a housing unit (including a rental property) or held a right to acquire a housing unit located in Canada for less than 365 consecutive days before the disposition, the property is generally considered to be a flipped property, unless it was already considered to be inventory of the trust. The resulting gain on the disposition of a flipped property is taxable as business income and not as a capital gain. Therefore, the trust cannot use the principal residence exemption. Very generally, exceptions to the flipped property rule may apply in certain situations where the disposition occurs due to, or in anticipation of, certain life events.

If the property is a flipped property, do not report the gain on Schedule 1, but rather report the income on Form T2125, Statement of Business and Professional Activities. If the property is not a flipped property, and the trust has a capital gain or loss, use Schedule 1 to report the disposition.

For more information about property flipping and the life event exceptions, go to Residential Property Flipping Rule or see T4037 – Capital Gains Guide.

Lines 7 to 9 – Listed personal property

Use this section to report dispositions of listed personal property (LPP), including all or part of any interest in, or any right to, all of the following properties:

• prints, etchings, drawings, paintings, sculptures, or other similar works of art
• jewellery
• rare folios, rare manuscripts, and rare books
• stamps
• coins

Because an LPP is a type of personal-use property, the capital gain or loss on the sale of the LPP item (or set of items) is calculated the same way as for personal-use property. For more information, see Line 6 – Personal-use property.

Line 10 – T3 information slips – Capital gains (or losses)

Use this line to report the following amounts from all T3 slips received for the tax year:

• capital gains from box 21 on a T3 slip
• insurance segregated fund net capital losses from box 37 of a T3 slip

If a T3 slip identifies amounts for "qualified small business corporation shares" or "qualified farm or fishing property" in its footnote area, do not report these amounts on line 10. Enter them on line 1 or 2, whichever is applicable. Enter them on line 1 or 2, whichever is applicable.

You can view your T3 information slip online in My Account for individuals.

Line 11 – T5, T4PS, and T5013 information slips – Capital gains (or losses) Information slips

Use this line to report all of the following amounts received in the tax year: 

• capital gains dividends from box 18 of a T5 slip
• capital gains (or losses) from box 34 of a T4PS slip
• capital gains (or losses) from box 30 of a T5013 slip

If a slip identifies amounts for “qualified small business corporation shares” or “qualified farm or fishing property” in its footnote, details, or other information area, do not report these amounts on line 11. Enter them on line 1 or 2, whichever is applicable.

You can view your T5, and other tax information slips online in My Account for individuals.

Line 13 – Capital losses from a reduction in business investment loss

Report a capital loss from a reduction in business investment loss on line 13. For more information, see Reduction in business investment loss.

Line 15 – Capital gains (losses) from reserves

If the trust sold capital property, but did not receive the full payment at the time of the sale, you can claim a reserve for the unpaid amount. Generally, the minimum amount of the trust's capital gain you have to report each year is 20% of the taxable capital gain. If you claimed a reserve in 2022, you have to bring it back into the trust's income in 2023. If any of the proceeds are to be paid after the end of the year, you may be able to claim a new reserve. If you are claiming a reserve on the trust's return, you have to complete Schedule 2. For more information about reserves, see Guide T4037, Capital Gains.

If the trust allocates and designates the taxable capital gain to one or more beneficiaries under the trust, the capital gain must be reported on a T3 slip issued to the beneficiary. For more information, see the definitions of “Allocate, allocation”, and “Designate, designation”, “Line 921 – Taxable capital gains” and “Box 21 – Capital gains”.

Where the capital gains being included in a personal trust’s income result from reserves related to dispositions of QSBCS or QFFP and the trust allocates the taxable capital gains eligible for the capital gains deduction to one or more beneficiaries, the trust must designate a portion of the trust’s eligible taxable capital gains to the beneficiary for the beneficiary’s capital gains deduction. For more information, see “Line 930 – Taxable capital gains eligible for deduction” and “Box 30 – Capital gains eligible for deduction”.

Line 17 – Capital gains on gifts of certain capital property eligible for the 0% inclusion rate

Enter on this line the amount from line 3 of Schedule 1A. On line 19, enter the capital gains on gifts of capital property included in lines 1 and 2 of Schedule 1A, excluding amounts reported on line 17.

Line 20 – Total capital losses transferred under subsection 164(6) of the Act

Enter on this line the amount of capital losses you transferred under subsection 164(6) to the deceased person's final T1 return. For more information, see Graduated rate estate elections (losses).

Line 23 – Non-qualified investments for TFSA, RRSP, RRIF, RDSP, RESP, and FHSA trusts, or disposition of interest in a partnership reported under subsection 100(1.1) of the Act

Use this section if the tax-free savings account (TFSA) trust, registered retirement savings plan (RRSP) trust, registered retirement income funds (RRIF) trust, registered disability savings plan (RDSP) trust, registered education savings plan (RESP), or first home savings account (FHSA) trust held non-qualified investments during the tax year.

Use this section if, as part of any transactions or events, the trust disposed of an interest in a partnership and the interest in the partnership is acquired by a tax-exempt entity, non-residents, certain persons and certain partnerships; see subsection 100(1) of the Act.

Line 24 – Total taxable capital gains (or net capital losses)

Transfer the total taxable capital gains to line 1 of the trust's return. If the amount on this line is negative, and is not used to reduce your deemed dispositions on Form T1055, Summary of Deemed Dispositions (2002 and later tax years), you have a net capital loss. Do not enter it on line 1 of the return. For more information, see Form T3A, Request for Loss Carryback by a Trust.

Form T1055, Summary of Deemed Dispositions – (2002 and later tax years)

Use Form T1055 to calculate the income, or the capital gain or loss, from deemed dispositions.

Deemed disposition

A trust is deemed to have disposed of its capital property (other than exempt property), land inventory, and Canadian and foreign resource properties on specified dates called deemed disposition days. For more information about the dates, see the next section Deemed disposition day.

For 2016 and subsequent years, where the primary beneficiary of an alter ego trust, spousal or common-law partner trust, or the last surviving beneficiary of a joint spousal or common-law partner trust dies, there is a deemed year-end of the trust on the date of death of the beneficiary. The income that is deemed to be recognized upon the death of the beneficiary must be reported on the trust’s T3 return filed for the deemed year-end of the trust.

However, for 2016 and subsequent years, in the case of a testamentary spousal or common-law partner trust, a joint election between the trust and the deceased beneficiary’s graduated rate estate can be filed to report the income that is deemed to be recognized upon the death of the beneficiary for the year in the beneficiary’s final T1 return. This income shall be reported on the T3 slip issued to the beneficiary. For the joint election to be valid all the following requirements must be met:

• Immediately before death, the beneficiary was a resident of Canada.
• The trust is a testamentary trust that is a post-1971 spousal or common-law partner trust and was created by the will of a taxpayer who died before 2017.
• A copy of the joint election is filed with both the final T1 return of the beneficiary and the T3 return for the deemed year-end of the trust. To make the election, send to the CRA a letter for both the final T1 return and the trust’s T3 return with all of the following information:
  • the T1 and T3 account numbers
  • the income amount that was allocated in the T3 slip and reported on the final T1 return filed for the deceased beneficiary
  • the signatures, names and addresses of both the trustee(s) of the trust and the executor(s) for the deceased beneficiary

The due date for both the T3 return as well as any balance payable of the deemed taxation year will be 90 days after the end of the calendar year in which the deemed year-end falls. For example, should the deemed year-end fall on June 3, the return and any balance payable will be due 90 days after December 31.

In addition to the properties referred to above, if a post-1971 testamentary spousal or common-law partner trust holds an AgriInvest Fund 2 that was transferred to it on the death of the settlor, report a deemed payment out of the fund on the day the beneficiary spouse or common-law partner dies.

If, after a deemed disposition that was to be reported on Form T1055, the trust actually disposed of the property in the same tax year, use Schedule 1 to report the gain or loss from the actual disposition. If the trust is a post-1971 spousal or common-law partner trust, a joint spousal or common-law partner trust, or an alter ego trust, the gain or loss should instead be reported on Form T1055.

If a deemed disposition occurs, the trust is considered to have done both of the following:

• disposed of its capital property (including depreciable property of a prescribed class), land inventory, and Canadian and foreign resource properties at the end of the deemed disposition day, at the fair market value (FMV)
• reacquired them immediately after, at a cost equal to the same FMV

For depreciable property, the trust has to report both capital gains and recapture of capital cost allowance.

Use Form T1055 to calculate:

• the adjustments to line 24 of Schedule 1
• the amount of tax on which the trust can elect to defer payment
• the amount of taxable and deemed taxable capital gains to which you can apply the trust's net capital losses of other years

Deemed disposition day

This is the day we consider the trust to have disposed of its capital property, land inventory, and Canadian and foreign resource properties.

Generally, it is one of the following:

• For a spousal or common-law partner trust, the day the beneficiary spouse or common-law partner died
• For a joint spousal or common-law partner trust, the day the settlor or the beneficiary spouse or common-law partner died, whichever is later
• For an alter ego trust, the day the settlor died, unless the trust filed an election not to be considered an alter ego trust (see the definition of alter ego trust). If the trust has filed an election, the deemed disposition date will be 21 years after the day the trust was created
• For a trust to which property was transferred by an individual (other than a trust) where the transfer did not result in a change in beneficial ownership of that property and no person (other than the individual) or partnership has any absolute or contingent right as a beneficiary under the trust, on the day the individual dies
• For other trusts, 21 years after the day the trust was created

Subsequent deemed dispositions will occur every 21 years, on the anniversary of the day established above.

The following deemed disposition days will not result in another deemed disposition on the 21st anniversary of that deemed disposition day. Instead, the next deemed disposition for such trusts will occur 21 years after the day the trust was created or on the anniversary of a deemed disposition day otherwise established:

• Where a trust distributes property after December 17, 1999, to a beneficiary in respect of the beneficiary's capital interest in the trust and it is reasonable to consider that the distribution was financed by a liability of the trust, and one of the reasons for incurring the liability was to avoid paying taxes because of the death of any individual, the day the property was distributed
• Where an individual has transferred property (other than real property situated in Canada, Canadian resource property, or a timber resource property, property of a business carried on by the trust through a permanent establishment in Canada including capital property, property included in Class 14.1 (eligible capital property before January 1, 2017) in respect of or, and property described in the inventory of the business, or certain pension or other similar rights or interests) after December 17, 1999, to a trust for the transferor’s spouse or common law partner, and it is reasonable to conclude that the property was transferred knowing that the individual planned to emigrate from Canada, the day the individual ceases to be resident in Canada

Exemption from Form T1055 deemed dispositions

When a trust is excluded from the deemed disposition rule in paragraph 104(4)(b) (for example, all of the trust’s interests had vested indefeasibly prior to the 21st anniversary after the day the trust was created), or is not reporting any deemed dispositions, a statement should be sent to us outlining the reason(s) for not filing Form T1055.

The following trusts are excluded from the deemed dispositions reported on Form T1055:

• A specified trust (as described in Chart 1 – Types of Trusts)
• A unit trust
• A trust in which all interests have been permanently vested. This exception applies primarily to those commercial trusts (all trusts other than personal trusts) that do not qualify as unit trusts. This exception does not apply to any of the following:
  • a post 1971 spousal or common-law partner trust
  • a joint spousal or common-law partner trust or an alter ego trust
  • a trust to which property was transferred by an individual (other than a trust) where the transfer did not result in a change in beneficial ownership of that property and no person (other than the individual) or partnership has any absolute or contingent right as a beneficiary under the trust
  • a trust resident in Canada that has non-resident beneficiaries, if the fair market value (FMV) of the non-resident beneficiaries' interests in the trust is more than 20% of the total FMV of all the interests in the trust
  • a trust that distributed property after December 17, 1999, to a beneficiary in respect of the beneficiary's capital interest in the trust and it is reasonable to consider that the distribution was financed by a liability of the trust, and one of the reasons for incurring the liability was to avoid paying taxes because of the death of any individual
  • a trust under the terms of which, all or part of any person's interest is to be terminated with reference to a period of time otherwise than as a consequence of terms of the trust under which an interest in the trust is to be terminated as a result of a distribution to the person (or the person’s estate) of property of the trust if the FMV of the property to be distributed is proportionate with the FMV of the person’s interest immediately before the distribution.

Form T2223, Election Under Subsection 159(6.1) of the Income Tax Act, by a Trust to Defer Payment of Income Tax

The trust can elect to pay its income tax arising from the deemed dispositions reported on Form T1055 in up to 10 annual instalments. Interest at the prescribed rate will apply. Use Form T2223 to make this election, and send it to your tax services office no later than the day the return is due for the tax year the deemed disposition occurs. For more information, call 1-800-959-8281.

Transfer of trust property to another trust

If one trust (Trust A) transfers capital property, land inventory, or resource property to another trust (Trust B), the deemed disposition day for Trust B becomes the earliest of the following dates:

• Trust A's deemed disposition day that would have occurred if the transfer had not been made
• Trust B's deemed disposition day that would have occurred if the transfer had not been made
• the day of the transfer if the original transfer to Trust A occurred on a rollover basis, for example, where Trust A is one of the following:
  • a spousal or common-law partner trust, and the beneficiary spouse or common-law partner is still alive at the time of the transfer
  • a joint spousal or common-law partner trust, and the settlor or beneficiary spouse or common-law partner is still alive at the time of the transfer
  • an alter ego trust, and the settlor is still alive at the time of the transfer

The last condition will not apply when the transfer is between two trusts of the same type. For example, from one alter ego trust to another alter ego trust.

Schedule 8 – Investment Income, Carrying Charges, and Gross-up Amount of Dividends Retained by the Trust ▲

Lines 1 to 3 – Dividends from taxable Canadian corporations

Send us a statement listing the actual amount of dividends the trust received from taxable Canadian corporations. In this statement, include actual and deemed taxable dividends. Do not include non-taxable dividends (see Lines 7 to 12 – Other investment income), or capital gains dividends that you report on line 10 or 11 of Schedule 1. We consider dividends credited to the trust's account by a financial institution to have been received by the trust, even if the trust did not receive a T3 or T5 slip.

The gross-up amount of taxable dividends received from taxable Canadian corporations qualifies for the dividend tax credit. This may reduce the trust's tax payable. If the trust designated the taxable dividends to beneficiaries, the tax payable by the beneficiaries may be reduced.

The type of dividends the trust receives determines which dividend tax credit rate it will apply to the gross-up amount of the dividends. For eligible dividends received from qualifying taxable Canadian corporations, the rate is 15.0198%. For dividends other than eligible dividends the rate is 9.0301%.

Box 23 on a T3 slip and box 10 on a T5 slip show the actual amount of dividends other than eligible dividends. Enter these amounts on line 1 of Schedule 8. Box 49 on a T3 slip and box 24 on a T5 slip show the actual amount of eligible dividends. Enter these amounts on line 2 of Schedule 8.

Lines 4 to 6 – Foreign investment income

Report investment income from foreign sources in Canadian dollars. Calculate how much to report by multiplying the foreign income by the exchange rate in effect on the day that the trust received the income. If the amount was paid at various times throughout the year, to get the applicable rate, go to Exchange Rates or call 1-800-959-8281. Report the full amount of the foreign income. Do not reduce it by the tax withheld by foreign authorities.

Lines 7 to 12 – Other investment income

Report bond interest, bank interest, mortgage interest, and other dividends (including dividends under a dividend rental arrangement). We consider interest and dividends credited to the trust's account by a financial institution to have been received by the trust.

Report interest on tax refunds received in the year on line 11.

Do not include the following:

• dividends the trust received from taxable Canadian corporations reported on lines 1 and 2
• capital gains dividends reported on line 10 or 11 of Schedule 1
• non-taxable dividends (see Non-taxable dividends received by a trust below)

For more information on the method of reporting interest and other investment income, see the General Income Tax and Benefit Guide, and archived Interpretation Bulletin IT-396, Interest Income.

Non-taxable dividends received by a trust

If the trust received a non-taxable dividend, do not include it in the trust's income. An example of a non-taxable dividend is a tax-free dividend that a Canadian private corporation pays from its capital dividend account.

Certain non-taxable dividends that the trust received, other than dividends paid out of the capital dividend account, may reduce the adjusted cost base of the shares on which the dividends were paid. Make this adjustment when calculating a capital gain or loss if the trust later disposes of the shares.

If the trust pays out non-taxable dividends to its beneficiaries, inform the beneficiaries that they should not include these dividends in income. You also have to file a statement with the return containing all of the following information:

• the name of the payer corporation
• the names of the beneficiaries, and the amount of non-taxable dividends that each beneficiary received

Lines 13 to 17 – Carrying charges and interest expenses

Carrying charges and interest expenses include:

• interest on money borrowed to earn investment income
• fees for the management or safe custody of investments
• accounting fees for recording investment income
• investment counsel fees

Do not include trustee fees paid by the trust or brokerage fees or commissions paid by the trust to buy or sell securities. If the trust paid these expenses to purchase a security, they are part of its cost. If the trust paid them to sell a security, claim them as "Outlays and expenses (from dispositions)" in column 4 of Schedule 1.

You can deduct interest expenses on a life insurance policy loan if the trust used the proceeds of the loan to earn income. If the trust elects to add the interest expense to the adjusted cost base of the policy, you cannot deduct it on line 14 of the return. If the trust is claiming interest paid on a policy loan during the year, the insurer has to complete Form T2210, Verification of Policy Loan Interest by the Insurer, no later than 90 days after the trust's tax year-end.

Lines 18 to 32 – Calculating the gross-up amount of dividends retained or not designated by the trust

Use this section to calculate the gross-up amount of actual dividends from taxable Canadian corporations included on lines 1 and 2 that the trust retained.

The gross-up rate for eligible dividends received in the year is 38% of the dividends received. This calculation is done on lines 18 to 24.

The gross-up rate for dividends other than eligible dividends received in 2023 is 15%. This calculation is done on lines 25 to 31.

The gross-up does not apply to taxable Canadian dividends received by the trust if they are allocated to a non-resident beneficiary.

If you have allocated dividends by including them in the amount on line 926 of Schedule 9, the dividends are not designated. Do not include them on line 19 or line 26.

Claim the carrying charges that relate to dividends on line 16 of Schedule 8.

Line 19 – Eligible dividends designated to beneficiaries

Enter the amount of net eligible dividends, after related expenses, that you designated to beneficiaries from line 949 of Schedule 9.

Line 21 – Eligible dividends allocated, but not designated, to non-resident beneficiaries

Enter the amount of net eligible dividends, after related expenses, included in Column 2, line 926 of Schedule 9. If the dividends have been allocated to non-resident beneficiaries on line 949, do not include them on line 21.

Line 24 – Gross-up amount of eligible dividends retained or not designated by the trust

Multiply the amount on line 22 by 38% to calculate the amount to enter on line 24. You have to apply the gross up rate to actual eligible dividends that have been retained in the trust, other than those allocated but not designated to non-resident beneficiaries, before you deduct the related expenses.

Enter this amount in the calculation area for line 13 of Schedule 11.

Line 26 – Dividends other than eligible dividends designated to beneficiaries

Enter the amount of net dividends other than eligible dividends, after related expenses, that you designated to beneficiaries from line 923 of Schedule 9.

Line 28 – Dividends other than eligible dividends allocated, but not designated, to non-resident beneficiaries

Enter the amount of net dividends other than eligible dividends, after related expenses, included in Column 2, line 926, Part A of Schedule 9. If the dividends have been allocated to non-resident beneficiaries on line 923, do not include them on line 28.

Line 31 – Gross-up amount of dividends other than eligible retained or not designated by the trust

Multiply the amount on line 29 by 15% for 2023 for dividends other than eligible dividends, and enter the result on line 31. You have to apply the gross-up rate to actual dividends other than eligible dividends that have been retained in the trust, other than those allocated but not designated to non-resident beneficiaries, before you deduct the related expenses.

Enter this amount in the calculation area for line 14 of Schedule 11.

Line 32 – Total gross‑up amount of dividends other than eligible retained or not designated by the trust

Add the gross-up amount of both the eligible dividends and the dividends other than eligible dividends from lines 24 and 31.

Enter the result on line 30 of the return and on line 18 of Schedule 12, if applicable.

For more information, see archived Interpretation Bulletin IT-524, Trusts – Flow-Through of Taxable Dividends to a Beneficiary – After 1987.

Schedule 9 – Income Allocations and Designations to Beneficiaries ▲

Complete this schedule if the trust is allocating income to its beneficiaries. You also have to complete T3 slips and a T3 Summary if you are allocating income to resident beneficiaries, and NR4 slips and an NR4 Summary if you are allocating income to non-resident beneficiaries.

Allocations and designations ▲

Generally, you allocate income to the trust's beneficiaries according to the terms of the will or trust document. Depending on the type of income allocated, you may then designate all or part of the allocated amount. When you designate an amount to a beneficiary, the type of income keeps its identity. This may allow the beneficiary to take advantage of a deduction or credit that applies to that income (such as the capital gains deduction or the dividend tax credit).

See definition of allocate, allocation, and designate, designation.

You can choose to designate the following income amounts to a beneficiary:

• net taxable capital gains
• certain lump-sum pension income
• dividends from taxable Canadian corporations
• foreign business income
• foreign non-business income
• pension income that qualifies for the pension income amount
• pension income that qualifies for acquiring an eligible annuity for a minor beneficiary
• retiring allowances that qualify for a transfer to a registered pension plan (RPP) or a registered retirement savings plan (RRSP)

Use Part B of Schedule 9 to report designated amounts. This includes amounts such as foreign income tax paid, a retiring allowance qualifying for transfer to an RPP and an RRSP, a Part XII.2 tax credit, and other tax credits that flow through to the beneficiary.

Income allocated to a beneficiary that is not deductible should not be reported on Schedule 9.

For more information, see the following archived interpretation bulletins:

• IT 342, Trusts – Income Payable to Beneficiaries
• IT 381, Trusts – Capital Gains and Losses and the Flow-Through of Taxable Capital Gains to Beneficiaries
• IT 524, Trusts – Flow-Through of Taxable Dividends to a Beneficiary – After 1987

Split Income

Tax on split income of a minor beneficiary

If a trust (other than a communal organization or a mutual fund trust as described in Chart 1 – Types of Trusts) allocates certain types of income to a beneficiary during the beneficiary's tax year and the beneficiary had not attained the age of 17 before the tax year, the beneficiary may have to pay a special tax (the tax on split income).

The tax on split income applies to all of the following:

• taxable dividends allocated by the trust (other than dividends from shares of a class listed on a designated stock exchange and those of a mutual fund corporation)
• shareholder benefits allocated by the trust (other than from ownership of shares of a class listed on a designated stock exchange)
• for taxation years before 2018, income allocated by the trust that came from providing services or property to, or in support of, a business operated by:
  • a person who is related to the beneficiary at any time in the year
  • a corporation that has a specified shareholder who is related to the beneficiary at any time in the year
  • a professional corporation that has a shareholder who is related to the beneficiary at any time in the year
• for 2018 and later years, income allocated by the trust that is derived directly or indirectly from one or more related businesses
• income allocated by the trust from the rental of property by a partnership or trust, if a person who is related to the beneficiary at any time in the year is actively engaged on a regular basis in the activity of the partnership or trust of earning that income
• for 2018 and later years, a taxable capital gain, or a profit, allocated by the trust from the disposition of property the income of which would be “split income” of the beneficiary if they received it directly
• deemed dividends that result from capital gains of a trust from the disposition of shares (other than shares of a class listed on a designated stock exchange or those of a mutual fund corporation) that are transferred to a person who is not at arm's length with the beneficiary

The tax on split income does not apply if:

• the income is from property the beneficiary inherits from either:
  • a parent
  • any other individual, if the beneficiary is either enrolled as a full time student during the year, in a post-secondary educational institution or qualifies for the disability tax credit for the year
• the beneficiary was a non-resident of Canada at the end of the year, or in case of a deceased beneficiary, was a non-resident of Canada immediately before death
• neither of the beneficiary's parents lived in Canada at any time in the year

For the 2018 and later tax year, the tax on split income will also not apply in respect of taxable capital gains from the disposition of qualified farm or fishing property or qualified small business corporation shares. This does not include taxable capital gains from the disposition of certain shares to a person that does not deal at arm's length with the beneficiary.

Tax on split income for an adult beneficiary

For 2018 tax and later years, the tax on split income will also apply to individuals over the age of 17, but only with respect to certain income derived from a related business.

For more information on the application of the tax on split income to adults, including information on amounts that are excluded from an adult’s split income for a tax year, and guidance on how the CRA will administer those exclusions, go to Income sprinkling.

How to report split income

If the trust is allocating "split income" to a beneficiary, you have to inform the beneficiary that they may have to pay the special tax. Follow the instructions for completing Schedule - 9 and the T3 slip. Send to the CRA a statement to the T3 slip showing the type and amount of the beneficiary’s share of the split income. Advise the beneficiary in writing that they must complete Form T1206, Tax on Split Income.

Transfers and loans of property

Special rules may apply to amounts from a property that, under certain conditions, is held by the trust or is transferred or loaned to the trust. We refer to a person who has loaned or transferred property as the "transferor."

A transferor, who is alive and resident in Canada, may lend or transfer property to the trust for the benefit of:

• the transferor's spouse or common-law partner, or a person who has since become the transferor's spouse or common-law partner
• the transferor's related minor (such as a child, grandchild, sister, brother, niece, or nephew under 18 years of age at the end of the year)

In either case, any income or loss from that property may have to be reported on the transferor's return.

The transferor may also have to report taxable capital gains or allowable capital losses from the disposition of property loaned or transferred to a trust for the benefit of the transferor's spouse or common-law partner, or a person who has since become the transferor's spouse or common-law partner.

The property may have been sold to the trust at its fair market value, or loaned to the trust at a prescribed rate of interest, which was paid within 30 days of the tax year-end. If this is the case, any income or loss, or any taxable capital gain or allowable capital loss, from that property is generally income of the trust. For this income, issue the T3 slip to the beneficiary, not to the transferor.

An individual can receive a low-interest or interest-free loan from a trust to which another individual transfers property. If the two individuals do not deal at arm's length, you will normally be required to report the income from that loaned property or any property substituted for it on the trust's return. This is not the case if the income is attributable to another individual. This also applies to an arm's length commercial loan that the individual uses to repay the original low-interest or interest-free loan.

If the trust's terms are such that the transferred property may revert to the transferor, or if the transferor keeps a certain degree of control over the property, see Exceptions and limits to income allocations.

If the income from loaned or transferred property is to be included on the transferor's return, you generally have to report it on the trust's return. Issue a T3 slip reporting the income as that of the transferor.

For more information about transfers and loans of property, see Guide T4037, Capital Gains, and the following archived interpretation bulletins:

• Archived IT-286R Trusts – Amount Payable
• Archived IT-369R Attribution of Trust Income to Settlor, and its Special Release
• Archived IT-510 Transfers and Loans of Property Made After May 22, 1985 to a Related Minor
• Archived IT-511R Interspousal and Certain Other Transfers and Loans of Property

Exceptions and limits to income allocations

Generally, trust income is allocated to beneficiaries, or taxed in the trust, according to the provisions of the will or trust document, with the following exceptions and limits:

• A post-1971 spousal or common-law partner trust (other than one created before December 21, 1991), joint spousal or common-law partner trust, or alter ego trust cannot deduct amounts payable in a tax year to anyone except one of the following:
  • for a trust that was a post-1971 spousal or common-law partner trust on December 20, 1991, or a spousal or common-law partner trust created after December 20, 1991, the beneficiary spouse or common-law partner, while the beneficiary spouse or common-law partner is alive
  • for a joint spousal or common-law partner trust, the settlor or the beneficiary spouse or common-law partner while either one of them is alive
  • for an alter ego trust, the settlor while the settlor is alive
• A post-1971 spousal or common-law partner trust, joint spousal or common-law partner trust, or alter ego trust cannot deduct the allocation of any income realized from deemed dispositions of capital property, land inventory of the trust's business, and Canadian and foreign resource property that arose on the death of one of the following:
  • for a post-1971 spousal or common-law partner trust, the beneficiary spouse or common-law partner
  • for a joint spousal or common-law partner trust, the settlor or the beneficiary spouse or common-law partner, whichever is later
  • for an alter ego trust, or a trust to which property was transferred by an individual (other than a trust) where the transfer did not result in a change in beneficial ownership of that property and no person (other than the individual) has any absolute or contingent right as a beneficiary under the trust, the day on which the death of the individual occurs
  • for the deemed payment from an AgriInvest Fund 2, the beneficiary spouse or common-law partner
• The trust cannot deduct income from payments out of an AgriInvest Fund 2 unless one of the following conditions are met:
  • the trust is a testamentary spousal or common-law partner trust and this income was received while the beneficiary spouse or common-law partner was alive
  • the trust is a communal organization
• Under subsection 75(2) of the Act, certain inter vivos trusts resident in Canada and which were created after 1934 may have property (or property substituted for it) that:
  • may revert to the contributor
  • may be distributed to beneficiaries determined by the contributor at a time after the trust was created
  • may only be disposed of with the consent of, or at the direction of, the contributor while the contributor is alive or exists

Certain related amounts, including taxable capital gains and allowable capital losses from that property or the substituted property, are considered to belong to the contributor during the contributor's life or existence while a resident of Canada. The trust must still report the amount on the trust's T3 return and issue a T3 slip reporting the amount as that of the contributor of the property. For more information, see archived Interpretation Bulletin IT-369R, Attribution of Trust Income to Settlor, and its Special Release.

The attribution rules in subsection 75(2) apply only in respect of property held by a trust that is factually resident in Canada. However, similar provisions exist in section 94 to apply to trusts that are deemed resident. Contact the Winnipeg Tax Centre for more information on how these rules apply.

• A trust cannot allocate capital losses and non-capital losses to beneficiaries of a trust except:
  • capital losses, if it is an insurance-related segregated fund trust
  • losses of revocable trusts and from blind trusts. Report these losses in brackets in the appropriate box on a separate T3 slip for the beneficiary. Clearly indicate the type of loss in the footnote area below box 26 on the T3 slip
• We consider income that was not paid or payable to a beneficiary to be allocated to a beneficiary if they have a vested right to its income, and:
  • the trust is resident in Canada throughout the year
  • the beneficiary is under 21 years of age at the end of the year
  • the beneficiary's right to income is vested by the end of the year, it did not become vested due to the exercise or non-exercise of a discretionary power by any person, and it is not subject to any future condition other than the condition that the beneficiary survive to an age of not more than 40 years
• The amount of income that can be allocated to a beneficiary may be limited if:
  • a beneficiary's share of the income of the trust is less than their capital interest in the trust
  • the beneficiary is a designated beneficiary and the trust was not resident in Canada throughout the tax year
• When a trust resident in Canada distributes property to a beneficiary and the trust realizes a capital gain, the trust can elect to treat the income as taxable in the trust. That is, the taxable capital gain will not be considered payable to the beneficiary if the trust:
  • was resident in Canada when it distributed the property
  • filed an election with its T3 return for the year, or a preceding tax year, in which the property was distributed

The election can be made for distributions to all beneficiaries or only for distributions to non-resident beneficiaries. The trust may have filed such an election in the current year or any preceding year. If this is the case, calculate the trust's income available for allocation to a beneficiary without taking into consideration any gains realized on the distribution of property to beneficiaries covered by the election while the trust was resident in Canada.

• A deemed resident trust is limited in the amounts that it can allocate to non-resident beneficiaries. For more information, contact the Winnipeg Tax Centre.
• For tax years that end after March 4, 2010, a resident contributor to a deemed resident trust may elect to include in computing their income, a portion of the income earned by the trust. Generally, this portion is equal to the amount of the resident contributor’s contribution to the trust as a percentage of all contributions made by all resident and connected contributors. The amount included in the electing contributor’s income will be deemed to be income from property from a source in Canada, unless the amount is designated by the trust under paragraph 94(16)I.

A valid election must be filed in writing, on or before the contributor’s filing due date for the first tax year for which the election is to take effect. A valid election must also include the trust’s Canadian tax account number, and proof that the contributor has notified the trust of the contributor’s intention to become an electing contributor no later than 30-days after the trust’s tax year that ends in the initial year. This is an irrevocable election. Once a resident contributor has chosen to become an electing contributor, they will continue to be an electing contributor for all subsequent tax years.

The trust may deduct, from its income for the tax year, an amount equal to the amount included in calculating the electing contributor's income as a result of this election. The trust must still report the amount on the trust’s T3 return and issue a T3 slip reporting the amount as that of the electing contributor of the property. For more information, contact the Winnipeg Tax Centre.

Income to be taxed in the trust ▲

You can choose to report income on the trust return, rather than report it in the hands of the beneficiaries, as long as the trust is:

• resident in Canada throughout the year
• not exempt from tax
• not a specified trust (as defined in Chart 1 – Types of Trusts)

This applies to income paid or payable to beneficiaries.

You make this choice by indicating on line 27 of the T3 return for the year that you are making a designation under subsection 104(13.1). Once you make this choice, you cannot deduct on line 28 the income designated in the election. An example of when you might use this designation is in a year when a trust has taxable income and a non-capital loss carry forward.

Once you make the choice, you have to make it for each beneficiary. It reduces a beneficiary's income from the trust by that beneficiary's proportionate share of the income reported on the trust's return. We show you how to calculate the proportionate share in the following section.

You can make a similar designation under subsection 104(13.2) if taxable capital gains are included in the income reported on the trust's return. This will reduce the beneficiary's taxable capital gains from the trust by that beneficiary's proportionate share of taxable capital gains reported on the trust's return.

An example of when you might want to make the subsection 104(13.2) designation is when you are able to use the trust's non-capital loss or net capital loss carry forward to absorb the current-year taxable capital gain.

Generally, amounts designated under subsections 104(13.1) and 104(13.2) will reduce the adjusted cost base of a beneficiary's capital interest in the trust unless the interest was acquired for no consideration and the trust is a personal trust.

If you choose to designate any portion of the beneficiary's income to be reported on the trust return:

• enter the amount on line 27 of the return
• send us a statement showing the income you are designating and the amounts you are designating for each beneficiary

Designations under subsections 104(13.1) and (13.2) to retain and tax income or capital gains in the trust are restricted after 2015 as a result of subsection 104(13.3). Subsection 104(13.3) ensures that these designations are made only to the extent that the trust has a nil taxable income for the year in which the designation is made.

Proportionate share formulas

Use the following formulas to calculate designations under subsections 104(13.1) and 104(13.2). You have to apply these formulas to each beneficiary. A trust cannot use these designations to tax one beneficiary's share in the trust and allocate another share to a beneficiary unless the trust agreement entitles one beneficiary to the trust's income and another beneficiary to the trust's capital.

Subsection 104(13.1)

A ÷ B × C

where:

A = beneficiary's share of trust income (calculated without reference to the Act)

B = total of amount A for all beneficiaries

C = trust income designated under subsection 104(13.1)

Subsection 104(13.2)

A ÷ B × C

where:

A = beneficiary's share of the taxable capital gains of the trust calculated under the Act

B = total of amount A for all beneficiaries

C = net taxable capital gains designated under subsection 104(13.2)

Preferred beneficiary election

A trust and a preferred beneficiary can jointly elect, in the year, to include in a preferred beneficiary's income for that year, all or part of the trust's accumulating income for the year. You can deduct the elected amount from the trust's income, up to the amount of the accumulating income. The elected amount for a preferred beneficiary must not be more than the allocable amount of the trust's total accumulating income. See the definition of Preferred beneficiary.

The preferred beneficiary election cannot be made by the trusts listed under Exemption from Form T1055 deemed dispositions.

For the trusts listed below, you can only make the election for the following:

• a spousal or common-law partner trust, in respect of the beneficiary spouse or common-law partner while the beneficiary spouse or common-law partner is alive
• a joint spousal or common-law partner trust, in respect of the settlor or the beneficiary spouse or common-law partner while either of them is alive
• an alter ego trust, in respect of the settlor while the settlor is still alive

A trust's accumulating income for the year is generally its income for the year after deductions, but without regard to amounts allocated under preferred beneficiary elections.

Accumulating income does not include the income from the deemed disposition of capital property, land inventory, or resource property on the death of:

• the beneficiary spouse or common-law partner, for a spousal or common-law partner trust
• the settlor or the beneficiary spouse or common-law partner, whichever is later, for a joint spousal or common-law partner trust
• the settlor, for an alter ego trust

Accumulating income also does not include income arising from the deemed disposition of property to a beneficiary that results in a disposition of all or part of the beneficiary's capital interest in the trust, when the property is distributed to a beneficiary other than all of the following:

• the beneficiary spouse or common-law partner for a post-1971 spousal or common-law partner trust if the beneficiary spouse or common-law partner is alive
• the settlor or the beneficiary spouse or common-law partner, for a joint spousal or common-law partner trust if either of them is alive
• the settlor, for an alter ego trust, if the settlor is alive

Accumulating income of a trust does not include amounts paid or deemed to have been paid from an AgriInvest Fund 2. However, a preferred beneficiary election can include these amounts paid to a testamentary spousal or common-law partner trust while the beneficiary spouse or common-law partner was still alive.

You can make a preferred beneficiary election for a tax year by filing the following:

• a statement making the election for the year, stating the part of the accumulating income on which you are making the election, and signed by both the preferred beneficiary (or guardian) and the trustee with the authority to make the election
• a statement signed by the trustee showing the calculation of the amount of the beneficiary's share of the accumulating income, and indicating the beneficiary's social insurance number, their relationship to the settlor of the trust, and whether one of the following conditions is met:
  • the beneficiary is claiming a disability amount
  • a supporting individual is claiming a disability amount for that beneficiary (if yes, provide the name, address, and social insurance number of the supporting individual)
  • the beneficiary is 18 years of age or older, and in the beneficiary's tax year that ends in the trust's tax year, another individual can claim an amount for an infirm dependant age 18 or older for that beneficiary, or could claim the amount if the beneficiary's income is calculated before including the income from the preferred beneficiary election. If this is the case, provide a statement from the medical practitioner confirming the beneficiary's impairment in the first year the claim is made

File the election with the return or separately, no later than 90 days after the end of the trust's tax year for which the election was made. For a preferred beneficiary election to be valid, you have to file it on time. If you file the election late, we will tax the accumulating income in the trust. For more information regarding late-filed or amended elections, see Elections.

If you are making a preferred beneficiary election, see archived Interpretation Bulletin IT 394, Preferred Beneficiary Election.

Preferred beneficiary election and the qualified disability trust election

The introduction of the qualified disability trust (QDT) provisions has not restricted the availability of the preferred beneficiary election, nor have there been any changes to the method in which a preferred beneficiary election is made. Many of the requisite conditions for making a preferred beneficiary election differ from those required for a trust to be a QDT. Accordingly, where the respective conditions of each election are met, the trust has the ability to choose whether to make a preferred beneficiary election or a QDT election. It is also possible for a trust which elects to be a QDT to also make a preferred beneficiary election (jointly with the beneficiary) in a given tax year.

How to complete Schedule 9 ▲

Report allocated income using the columns provided:

Column 1 – income paid or payable to resident beneficiaries
Column 2 – income paid or payable to non-resident beneficiaries
Column 3 – income allocated by a preferred beneficiary election

For more information, see the appropriate column heading in the following sections. Any amounts allocated to a beneficiary on lines 921 to 926 and on line 949 are generally deducted from the trust's income.

Before allocating income to the beneficiaries, you must first take into consideration the trust's expenses. If the trust claimed expenses on line 20 of the T3 return, deduct them from the specific source of income to which the expense relates. If the expense relates to more than one source of income, you must divide it between the applicable sources of income. The trust can then allocate the remaining income to the beneficiaries.

Column 1 – Resident ▲

Include in this column, allocations and designations of income paid or payable to resident beneficiaries. If the income is allocated, but no amounts are designated, enter the total amount on line 926. If you are designating the income, enter the amounts on the appropriate lines. In addition, use Part B for other amounts you are designating to the beneficiaries.

For more information, see:

• Allocations and designations
• archived Interpretation Bulletin IT 286R, Trusts – Amount Payable
• archived Interpretation Bulletin IT 342R, Trusts – Income Payable to Beneficiaries

Column 2 – Non-resident ▲

Include in this column, allocations and designations of income paid or payable to non-resident beneficiaries. If the income is allocated, but no amounts are designated, enter the total amount on line 926. Report the total of the amounts in column 2 as estate or trust income on an NR4 slip, not on a T3 slip.

Most amounts paid or payable to non-resident beneficiaries are subject to a Part XIII withholding tax. For more information, see Part B – Calculating Part XIII non-resident withholding tax. Enter the total of column 2 on line 15 of Schedule 10.

If you allocate certain income to non-resident beneficiaries, the trust may also be subject to Part XII.2 tax. When allocating such income, include the full amount before deducting Part XII.2 tax. For more information, see Schedule 10 - Part XII.2 Tax and Part XIII Non-Resident Withholding Tax.

Column 3 – By preferred beneficiary election ▲

A trust and a preferred beneficiary can jointly elect to have the trust's accumulating income taxed in the hands of the preferred beneficiary. Use column 3 to allocate and designate the elected accumulating income. Complete a separate T3 slip for this income.

You can designate all of the following types of income under a preferred beneficiary election:

• taxable capital gains (line 921)
• actual amount of dividends from taxable Canadian corporations, both eligible dividends (line 949) and dividends other than eligible dividends (line 923)
• foreign business income (line 924)
• foreign non-business income (line 925)

You have to make the designations on the trust's return for the year in which you include the relevant amounts in the trust's income. If the income is allocated but no amounts are designated, enter the total amount on line 926. If you are designating the income, enter the amounts on the appropriate lines. In addition, use Part B for other amounts you are designating to the beneficiaries.

Part A – Total income allocations and designations to beneficiaries
Lines 921 to 928 and 949▲

Answer all seven questions, and send us any necessary statements. For information about income attributed to the transferor, see Transfers and loans of property.

Line 921 – Taxable capital gains ▲

You can allocate and designate all or part of a Canadian resident trust's net taxable capital gains to a beneficiary. If you designate this amount, we consider it to be the beneficiary's taxable capital gain.

A trust's net taxable capital gain is the amount by which the total of the trust's taxable capital gains for a tax year (which includes, amounts that are deemed to be taxable capital gains to the trust for the year), is more than the total of:

• the trust's allowable capital losses for the tax year (except, allowable business investment losses)
• net capital losses of other years deducted in calculating the trust's taxable income for the tax year

When calculating the maximum net taxable capital gains available for designation in the current year, you have to reduce the net taxable capital gains (as calculated above) by both of the following:

• Any expenses the trust incurred to earn income included on line 1 of the return
• Amounts designated under subsection 104(13.2) to be taxed in the trust, other than amounts for which a deduction has been claimed on line 34. For more information, see Income to be taxed in the trust

You have to include both of the following in the amounts you enter on line 921:

• capital gains distributions designated as payable by a mutual fund trust to a non-resident beneficiary
• net taxable capital gains allocated by a trust governed by an employee benefit plan

If you complete line 921 and you are allocating capital gains eligible for the capital gains deduction, you also have to complete line 930. The only taxable capital gains eligible for this deduction are from the disposition of qualified farm or fishing property made after May 1, 2006, and qualified small business corporation shares.

Line 922 – Lump-sum pension income ▲

In a year throughout which a testamentary trust was a resident of Canada, it can designate to a beneficiary all of the following:

• certain pension income
• superannuation benefits
• amounts received from a deferred profit sharing plan

Complete Schedule 7, Pension Income Allocations and Designations. Enter on line 922, those amounts from Schedule 7 that qualify for a transfer to a registered pension plan or a registered retirement savings plan.

Line 923 – Actual amount of dividends other than eligible dividends

Enter on this line the trust's actual amount of dividends other than eligible dividends designated to beneficiaries of the trust in the year.

Line 924 – Foreign business income

Enter on line 924 the trust's foreign business income designated to the beneficiaries in the year.

Line 925 – Foreign non-business income

Enter all foreign non-business income designated to beneficiaries. This may include income from a foreign pension or interest from foreign sources.

Line 926 – Other income ▲

Enter on this line all income allocated to beneficiaries that is not shown on lines 921 to 925 or line 949. This includes business, farming, fishing, or rental income, interest or pension income (other than from foreign sources and lump-sum pension income included on line 922), death benefits, retiring allowances, and dividends under a dividend rental arrangement. Include the amount of any taxable benefits to resident beneficiaries under the trust, unless the amounts are included on lines 921, 923 or 949.

A graduated rate estate may be able to designate, in a year throughout which it was a resident in Canada, a lump-sum payment out of a registered pension plan to a beneficiary to acquire an annuity. Include these amounts from Schedule 7, Pension Income Allocations and Designations, on line 926. Show on line 946 the amount that qualifies for a transfer.

Line 949 – Actual amount of eligible dividends

Enter the actual amount of net eligible dividends, after related expenses, designated to beneficiaries in the year.

Line 928 – Totals ▲

The total of lines 921 to 926, plus line 949 is the income allocated to the beneficiaries. The amount cannot be more than "Income before allocations" on line 25 of the return.

Part B – Summary of other amounts designated to beneficiaries
Lines 930 to 951▲ 

Complete this area only when there are designations, such as dividends from taxable Canadian corporations, foreign taxes paid for credit purposes, and pension income or retiring allowances qualifying for a transfer.

Line 930 – Taxable capital gains eligible for deduction

A personal trust that makes a designation on line 921 and has eligible taxable capital gains, also has to designate a portion of the trust's eligible taxable capital gains to the beneficiary for the beneficiary's capital gains deduction.

Calculate the trust’s eligible taxable capital gains on Schedule 3. Enter on line 930, the lesser of the following amounts:

• the amount on line 921
• the amount on line 30 of Schedule 3

Where the trust has realized in its tax year both taxable capital gains which are eligible for determining a beneficiary’s capital gains deduction, and taxable capital gains that are not eligible, very generally, the rules ensure that a proportionate share of each of the eligible taxable capital gain, and the non-eligible taxable capital gain is allocated and designated to each beneficiary. For more information, see “Box 30 – Capital gains eligible for deduction”.

Where the trust’s taxable capital gains eligible for deduction in the current tax year relate to a capital gain reserve claimed in the trust’s prior tax year, see “Line 15 – Capital gains (losses) from reserves” and “Box 30 – Capital gains eligible for deduction”.

Line 931 – Qualifying pension income ▲

Enter those amounts from Schedule 7, Pension Income Allocations and Designations, that qualify for the pension income amount. You can make this designation only if the beneficiary was the spouse or common-law partner of the deceased, and if the trust received the benefits of a life annuity from a superannuation or pension plan.

Line 932 – Taxable amount of dividends other than eligible dividends ▲

If you are designating dividends other than eligible dividends to a beneficiary who is either an individual or a trust (other than a registered charity), enter the result of the amount from line 923 multiplied by 1.15.

Line 933 – Foreign business income tax paid

Enter the trust's foreign business income tax paid and designated to the beneficiaries of the trust in the year on line 933.

Line 934 – Foreign non-business income tax paid

If you are designating a foreign tax credit to a beneficiary, you have to submit an official receipt or information slip from the foreign country. This is necessary to support the claim that the trust paid foreign non-business income tax, or that it was withheld from foreign non-business income the trust earned.

The portion of foreign taxes you designate to a beneficiary has to be in proportion to the foreign income you designate to that beneficiary. You have to convert any foreign taxes paid in foreign currency to Canadian funds.

For more information, see Income Tax Folio S5-F2-C1, Foreign Tax Credit, archived Interpretation Bulletin IT 201R, Foreign Tax Credit – Trusts and Beneficiaries, and see Line 23 – Federal foreign tax credit.

Line 935 – Eligible death benefits ▲

A graduated rate estate (GRE) may receive a payment as a result of the employee's death to recognize the employee's service in an office or employment. Such a payment is usually from the deceased person's employer or from a trust fund the employer established. This payment may qualify as a death benefit, and the trust may be able to exclude up to $10,000 of the amount from income.

If the GRE allocates the total death benefit to a single beneficiary according to the provisions of the will, the beneficiary may be able to exclude up to $10,000 of the payment from income. Enter on line 935, the amount from line 926 eligible for this exclusion.

Where the GRE allocates the total death benefit to more than one beneficiary, apportion the amount eligible for this exclusion among those beneficiaries. The total eligible amount apportioned cannot exceed $10,000. The beneficiaries can use this information to calculate the taxable portion that they have to report on their T1 returns.

If you exclude the eligible death benefit from the trust's income, only the taxable portion flows out to the beneficiary. Report only the taxable portion of the death benefit on line 11 of the T3 return. For more information, see Line 11–Other income.

Line 937 – Insurance segregated fund net capital losses

Enter the designated portion of net capital losses from the disposition of property by an insurance segregated fund.

Line 938 – Part XII.2 tax credit

Calculate the amount for line 14 of Schedule 10, and enter it here. Generally, you can designate the Part XII.2 tax credit only to those resident beneficiaries to whom you allocated income in column 1 of line 928, Schedule 9.

Line 939 – Dividend tax credit for dividends other than eligible dividends ▲

Enter the result of the amount from line 932 multiplied by 9.0301%.

Lines 940 and 941 – Investment tax credit (ITC)

For 2016 and subsequent years, only graduated rate estates and communal organizations that are deemed to be inter vivos trusts can designate an ITC to their beneficiaries.

Complete Part A of Form T2038-IND Investment Tax Credit (Individuals), to calculate the amount of the investment cost or expenditure and the ITC available. You will need the eligible amounts the trust invested to acquire property and the eligible expenditures for this part of the form.

You have to reduce the trust's ITC by any amount allocated to beneficiaries.

Enter the beneficiaries' share of the trust's investment cost or expenditures on line 940. You need this amount to determine the amount of the ITC you can designate to each beneficiary.

Enter on line 941, the amount of the trust's ITC from Form T2038-IND that you designated to a beneficiary and did not deduct on line 26 of the trust's Schedule 11.

Line 942 – Amount resulting in cost base adjustment

Enter the amount by which the cost base of a beneficiary's interest in the trust may be reduced or increased.

Line 945 – Other credits

Research and development tax credit

This credit is available to a trust resident in Newfoundland and Labrador, or Yukon. Enter the amount of this credit that you designated to a beneficiary and did not deduct on page 4 of the return. For more information, see Line 68 – Total other credits.

Line 946 – Pension income qualifying for an eligible annuity for a minor ▲

Enter those amounts from Column D of Schedule 7, Pension Income Allocations and Designations, that qualify for an eligible annuity for a minor on line 946.

Line 947 – Retiring allowance qualifying for transfer to an RPP or an RRSP

Enter any retiring allowance eligible for a transfer to an RPP or an RRSP on line 947.

Line 948 – Eligible amount of charitable donations

Enter charitable donations designated to the beneficiaries of a communal organization on line 948.

Line 950 – Taxable amount of eligible dividends ▲

If you are designating eligible dividends to a beneficiary who is either an individual or a trust (other than a registered charity), enter the result of the amount from line 949 multiplied by 1.38.

Line 951 – Dividend tax credit for eligible dividends ▲

Enter the result of the amount from line 950 multiplied by 15.0198%.

Schedule 10 – Part XII.2 Tax and Part XIII Non-Resident Withholding Tax

Complete Schedule 10 if the trust is allocating income to designated beneficiaries where the trust has specified income (see the next section for details). The total of Part XII.2 and Part XIII tax is approximately equal to the Part I tax, plus provincial or territorial taxes, that would apply to the income if the beneficiaries were resident in Canada.

Part A – Calculating Part XII.2 tax and the refundable Part XII.2 tax credit – Lines 1 to 14

Pay any Part XII.2 tax no later than 90 days after the trust's tax year-end.

Part XII.2 tax applies when a trust meets all of the following conditions:

• has specified income as described below
• has a designated beneficiary as described below
• allocates or designates any of its income

Part XII.2 tax does not apply to a trust that was one of the following throughout the year:

• a graduated rate estate
• a mutual fund trust
• a specified trust (as defined in Chart 1 – Types of Trusts), unless the trust is a related segregated fund trust, a retirement compensation arrangement trust, a trust whose direct beneficiaries are specified trusts, a trust governed by an eligible funeral arrangement, a cemetery care trust and, in certain circumstances, an amateur athlete trust
• a trust that was exempt from Part I tax under subsection 149(1) of the Act
• a non-resident trust
• a deemed resident trust

Specified income

Specified income of a trust generally means its taxable capital gains or allowable capital losses from the disposition of taxable Canadian property, certain property transferred to a trust in contemplation of a person beneficially interested in the trust ceasing to be resident in Canada, and the total income (or loss) from all of the following sources:

• businesses carried on in Canada
• real or immovable properties located in Canada, such as land or buildings
• Canadian timber resource properties
• Canadian resource properties the trust acquired after 1971

Designated beneficiary

Subject to all of the exclusions listed below, for the purpose of Part XII.2 tax, a designated beneficiary under a particular trust at any time, includes:

• a non-resident person
• a person who is exempt from Part I tax on all or part of their taxable income under subsection 149(1), where that person acquired an interest as a beneficiary under the particular trust after October 1, 1987 directly or indirectly from a beneficiary under the trust. For example, there are two exceptions to this rule. A person exempt from Part I tax is not a designated beneficiary if:
  • the interest has been owned continuously since the later of October 1, 1987 and the date on which the trust was created, by persons who were exempt from Part I tax on all of their taxable income under subsection 149(1)
  • the person is a trust governed by an RRSP or RRIF that acquired the interest directly or indirectly from an individual, the spouse or common-law partner, or former spouse or common-law partner of the individual who was, a beneficiary under the trust governed by the plan or fund
• another trust if any of its beneficiaries is either a trust or a designated beneficiary
• a partnership if any of its members is either a partnership or would be a designated beneficiary if that member held an interest in a trust

A designated beneficiary does not include any of the following:

• a mutual fund trust resident in Canada
• a graduated rate estate
• an RRSP or RRIF that acquired its interest directly or indirectly from its beneficiary, the beneficiary’s spouse or common-law partner, or former spouse or common-law partner
• an entity that is exempt from Part I tax if its interest in the trust has been owned continuously since October 1, 1987, or the date on which the trust was created, by one or more entities that are exempt from Part I tax under subsection 149(1)
• a partnership, which would otherwise be a designated beneficiary, where no members of the partnership are designated beneficiaries and the partnership’s interest in the trust has never been held by anyone other than the partnership or an entity that is exempt from Part I tax under subsection 149(1)
• a trust, the beneficiaries of which are all either trusts that have no designated beneficiaries, or persons who are not designated beneficiaries

A designated beneficiary is usually not entitled to the refundable tax credit for Part XII.2 tax that the trust paid. This means that you will generally not complete box 38 on the T3 slip for a designated beneficiary who is a Canadian resident. Also, before you calculate Part XIII non-resident withholding tax, you have to reduce the income payable to a non-resident beneficiary by the non-resident’s share of the Part XII.2 tax. For more information, see Line 13 – Adjustment for Part XIII tax purposes.

Eligible beneficiary

This term is used for a beneficiary who is not a designated beneficiary as described above. An eligible beneficiary is generally a Canadian resident who is entitled to a refundable Part XII.2 tax credit in proportion to the share of allocated or designated trust income. You have to include an amount equal to the Part XII.2 tax credit in the income allocated to the beneficiary. In effect, this credit replaces the income that the beneficiary would have received if the trust did not have to pay Part XII.2 tax.

Line 6 – Total specified income

This is the total of lines 1 to 5, which represents the specified income of the trust. Part XII.2 tax does not apply if the amount on line 6 is negative.

Lines 7, 8, 10, and 11 – Adjusted amounts allocated and designated to beneficiaries

Enter on line 7, the amount from column 1 of line 928, Schedule 9. Enter on line 8, the amount from column 2 of line 928, Schedule 9. Enter on line 10, the taxable benefits you reported on line 23 of the return.

Line 11 represents both of the following amounts:

• the deduction from trust income for the portion of the trust's income you allocated to resident and non-resident beneficiaries, to be included in their income
• the deduction from trust income for the Part XII.2 tax the trust paid for the year

Withhold the Part XII.2 tax from income you distribute to the beneficiaries.

Line 12 – Part XII.2 tax payable

Multiply by 40%, the lesser of the amount on line 6 and the amount on line 11. Enter the result on line 46 of the return.

Line 13 – Adjustment for Part XIII tax purposes

Calculate the amount of Part XII.2 tax that you attribute to non-resident beneficiaries. Transfer the amount from line 13 to line 21 to reduce the income subject to Part XIII tax.

Line 14 – Part XII.2 refundable tax credit for eligible beneficiaries

This is the amount of Part XII.2 tax attributable to eligible beneficiaries. It is also the amount eligible for the Part XII.2 refundable tax credit for these beneficiaries.

If there is more than one eligible beneficiary, use the formula below to determine the amount of refundable tax credit to report in box 38 of the T3 slip for each eligible beneficiary:

A × B ÷ C

where:

A = Part XII.2 tax paid by the trust (line 12)

B = each eligible beneficiary's share of the amount from line 11 (the trust income you allocated to the eligible beneficiaries)

C = adjusted allocations or designations for the year (line 11)

Part B – Calculating Part XIII non-resident withholding tax – Lines 15 to 27

Complete this part if the trust allocated income to non-resident beneficiaries.

Line 18 – Taxable capital gains distributions designated as payable by a mutual fund trust

After March 22, 2004, a mutual fund trust that designates more than 5% of its capital gains distributions to non-resident beneficiaries (including any partnership that is not a Canadian partnership) must do an additional calculation for line 18. If this applies to the trust, complete lines 28 to 47 at the bottom of Part B. Enter the amount from line 43 of Schedule 10 on line 18.

Line 20 – Amounts not subject to Part XIII tax: Other

One example of an amount to enter on this line is an amount you paid or credited to a beneficiary resident in the United States, when the amount is derived from income sources outside Canada and it is not subject to withholding tax under the Canada – U.S. Tax Convention.

Line 21 – Part XII.2 tax amount

On this line, enter the amount from line 13, which is the amount of Part XII.2 tax you attribute to designated beneficiaries.

Line 23 – Taxable Canadian property gains distributions for non-resident beneficiaries

A mutual fund trust that designates more than 5% of its capital gains distributions to non-resident beneficiaries (including any partnership that is not a Canadian partnership) must include a portion of the distributions when calculating Part XIII tax. Enter the amount calculated at line 42 of Schedule 10 on line 23.

Lines 25 to 27 – Non-resident tax payable

Complete the rest of this schedule by referring to the NR4 return for the trust.

Every non-resident person has to pay Canadian income tax of 25% under Part XIII, unless a tax treaty or convention provides a lower rate. Part XIII tax is paid on amounts that a Canadian trust paid or credited, or is considered to have paid or credited, to non-residents. You have to withhold and remit tax on these amounts. This tax has to be received by the Canada Revenue Agency or a Canadian financial institution on or before the 15th day of the month after the month during which the tax was withheld.

Calculate the amount of non-resident tax payable and any balance due by following the steps in Part B of Schedule 10. Send any balance due to us, with Form NR76, Non-Resident Tax – Statement of Account, which is a combined remittance statement and receipt.

If you are remitting Part XIII tax for the first time, send to the CRA a statement with the trust's name and address, the type of payment (Part XIII tax), and the month during which you withheld the tax. When we receive the payment, we will issue Form NR76. You can use the bottom portion for remitting future payments.

You also have to complete an NR4 Summary, Summary of Amounts Paid or Credited to Non Residents of Canada, and an NR4 slip, Statement of Amounts Paid or Credited to Non Residents of Canada.

For more information on non-resident income tax, see:

• Information Circular IC76 12R, Applicable rate of Part XIII tax on amounts paid or credited to persons in countries with which Canada has a tax convention
• Information Circular IC77 16R4, Non-Resident Income Tax
• archived  Interpretation Bulletin IT 465R, Non-Resident Beneficiaries of Trusts                 

Completing the NR4 return

Report the total trust income you allocated to a non-resident beneficiary as estate and trust income on the NR4 return. Types of income, except for taxable capital gains from a mutual fund trust, lose their identity when allocated to a non-resident beneficiary. Therefore, you have to total and report them as "Gross income" in box 16 of the NR4 slip. In box 14 or 24, enter an income code of "11" for estate or trust income. Enter a code of "58" if there were taxable Canadian property gains distributions to the non-resident.

File this return no later than 90 days after the end of the trust's tax year.

Schedule 11 – Federal Income Tax

Use Schedule 11 to determine the federal income tax payable by the trust.

Lines 8 and 9 – Federal tax on taxable income

Graduated Rate Estates (GRE) or Qualified Disability Trusts (QDT)

A graduated rate estate or a qualified disability trust is taxed on its taxable income for the year at the federal tax rates for individuals. For more information on these types of trusts, see the description in Chart 1 – Types of Trusts.

Trusts other than GRE and QDT

Trusts other than a GRE or a QDT are taxed on their taxable income for the year at the highest individual rate of 33%.

In addition, include any tax payable by a specified investment flow-through (SIFT) trust. For more information on SIFT trusts and their tax calculation, go to Specified investment flow-through (SIFT) trust income and distribution tax.

Line 11 – Federal recovery tax ▲

Use this line to enter the result from the calculation on Form T3QDT-WS, Recovery Tax Worksheet.

Recovery Tax

A trust that was a qualified disability trust in a previous tax year is subject to the new recovery tax in a year if one of the following conditions is met:

• The trust ceases during the year to have among its beneficiaries any individuals who in one or more earlier tax years of the trust were electing beneficiaries of the trust. This will include the year in which the electing beneficiary of the trust (or if the trust had more than one electing beneficiary, the last of them) dies
• The year is the tax year deemed to have ended because the trust ceased to be resident in Canada
• The trust distributes capital to a beneficiary other than an individual who is an electing beneficiary for a particular year or was an electing beneficiary of the trust in an earlier tax year. The making by the trust of an amount payable out of the trust’s income for a year (i.e., the flowing out of its current income), or the subsequent satisfaction of a beneficiary’s right to enforce such an amount, does not trigger the application of the recovery tax. A payment to a beneficiary in the beneficiary’s capacity as a creditor of the trust also does not trigger the application of the recovery tax

Lines 13 to 15 – Federal dividend tax credit ▲

Complete these lines if the trust reported a gross-up amount on line 24 or line 31 of Schedule 8 for dividends received from a taxable Canadian corporation in the tax year.

Calculate the dividend tax credit for eligible dividends by multiplying the gross-up amount from line 24 of Schedule 8 by 54.5455%. Calculate the dividend tax credit for dividends other than eligible dividends by multiplying the gross-up amount from line 31 of Schedule 8 by 69.2308%. Enter the total of these amounts on line 15.

Line 16 – Donations and gifts tax credit ▲

Enter the amount from line 30 of Schedule 11A. Send us official receipts for all claims.

Line 19 – Minimum tax carryover from previous years

If the trust paid minimum tax in the 2016 to 2022 tax years, and does not have to pay minimum tax for the 2023 tax year, you may be able to claim a credit against the trust’s 2023 taxes payable. Use Part 7 of Schedule 12, Minimum Tax, to calculate the total minimum tax carryover.

Line 21 – Surtax on income not subject to provincial or territorial tax

A resident trust that carries on business through a permanent establishment in a foreign country has to pay a federal surtax of 48% of its basic federal tax attributable to the income earned in the foreign country.

A non-resident trust, or a deemed resident trust, pays this tax instead of provincial or territorial tax. However, business income that the trust earned in a province or territory through a permanent establishment in that province or territory is subject to the provincial or territorial tax instead of this 48% surtax.

For more information, see Form T3MJ, Provincial and Territorial Taxes – Multiple Jurisdictions.

Line 23 – Federal foreign tax credit

This credit is available to a resident trust only for foreign income or profit taxes the trust paid on income it received from sources outside Canada. When you calculate the foreign tax credit, convert all amounts to Canadian currency. If the amount was paid at various times throughout the year, to get the applicable rate, see Exchange Rates or call 1-800-959-8281.

In general, the foreign tax credit you can claim for each foreign country is the lesser of:

• the tax the trust paid to a foreign country
• the tax payable to Canada on the portion of the income the trust earned in the foreign country

Use Form T3 FFT, T3 Federal Foreign Tax Credits, to calculate the trust’s foreign tax credit. When you complete Form T3 FFT, base the calculation of the credit on foreign income amounts that have been retained by the trust and not allocated to a beneficiary. Do not include any amounts relating to the designation of foreign income and foreign tax credits to the beneficiaries. Enter on line 23, the amount from line 12 of Form T3 FFT.

The trust's federal foreign tax credit may be less than the tax paid to a foreign country. The trust can carry unclaimed foreign tax paid on business income back 3 years and forward 10 years.

The trust cannot carry forward or carry back excess amounts of any foreign non-business income tax. You may be able to claim some or all of the excess as one of the following:

• a provincial or territorial foreign tax credit on Form T3 PFT, T3 Provincial or Territorial Foreign Tax Credit (a trust resident in Quebec should contact Revenu Québec about its entitlement to this credit)
• a deduction on line 19 of the return (see archived  Interpretation Bulletin IT-506, Foreign Income Taxes as a Deduction from Income)

Send us proof of the tax the trust paid to a foreign country.

For more information, see Income Tax Folio S5-F2-C1, Foreign Tax Credit, and archived Interpretation Bulletin IT-201R, Foreign Tax Credit – Trusts and Beneficiaries.

Line 25 – Allowable federal political contribution tax credit

Claim the federal political contributions tax credit for the eligible amount of monetary contributions to a registered party, a registered association, or a candidate, as defined in the Canada Elections Act. Use the chart below to calculate the credit.

Enter the total allowable credit on line 25. If the trust's total eligible federal political contributions are $1,275 or more, enter $650 on line 25. Send us an official receipt to the return as proof of the contribution. You do not have to send us a receipt for an amount shown in box 36 of a T5013 slip, or in a financial statement showing an amount a partnership allocated to the trust. For more information, see Information Circular IC75-2R, Contributions to a Registered Party, a Registered Association or to a Candidate at a Federal Election.

Federal Political Contribution Tax Credit

If your total federal political contributions (line 24 of your Schedule 11) were $1,275 or more, enter $650 on line 25 of your Schedule 11.

Line 26 – Investment tax credit

A trust can claim an investment tax credit (ITC) on eligible investments and qualified expenditures that are listed on Form T2038(IND), Investment Tax Credit (Individuals). For example, a trust can claim an ITC on certain buildings, machinery, or equipment to be used in certain areas of Canada in qualified activities such as farming, fishing, logging, or manufacturing.

To claim an ITC, you have to send to the CRA the completed Form T2038(IND) no later than 12 months after the due date of the return for the year the expenditure occurred.

Send us a completed copy of Form T2038 (IND) if the trust:

• earned an ITC in the tax year
• is carrying forward a credit
• had an ITC recapture
• is claiming refundable ITC in the tax year (on line 51 of the T3 return)

Reduce the cost of eligible investments and qualified expenditures by the portion of the credit deducted or refunded. Reduce these costs in the year after the trust:

• claims the credit
• acquired the asset if it:
  • made the claim or refund in the year of acquisition
  • applied the claim to a previous year

For example, the capital cost of property is reduced in 2023 by any ITC that the trust earned in 2022, and that was claimed or refunded on the 2022 return or applied to a previous year.

You will have to report an ITC recapture for the trust if the trust meets the following conditions:

• acquired the property in this or any of the previous 11 tax years
• claimed the cost, or a portion of the cost, of the property as a qualified expenditure for scientific research and experimental development
• included the cost, or a portion of the cost, of the property in calculating the trust's ITC, or was the subject of an agreement to transfer qualified expenditures
• disposed of the property or converted it to commercial use after February 23, 1998

For 2016 and subsequent tax years, only a graduated rate estate and a communal organization that is treated as a trust can designate all or part of its deductible ITC amount to one or more of its beneficiaries, taking into consideration the terms of the trust. For these trusts, when calculating their ITC to be claimed in the year, do not include the amount designated on line 941 of Schedule 9. Reduce the cost of the qualified property acquisitions or expenditures by the amount of any ITC that you designated to the beneficiaries in the tax year.

For more information, see Form T2038(IND).

Line 32 – Additional tax on RESP accumulated income payments

If you received an accumulated income payment from a registered education savings plan (RESP) in the year, you may have to pay an additional tax on all or part of the amount in box 40 of your T4A slip. If this is the case, complete Form T1172, Additional Tax on Accumulated Income Payments from RESPs. Enter the amount from line 13 on line 32 of Schedule 11.

For more information, see Information Sheet RC4092, Registered Education Savings Plans.

Line 34 – Refundable Quebec abatement ▲

A trust may be entitled to an abatement of 16.5% of its basic federal tax.

If the trust was resident in Quebec on the last day of its tax year and it did not have income from a business with a permanent establishment outside Quebec, complete line 34.

Use Form T3MJ, Provincial and Territorial Taxes – Multiple Jurisdictions, to calculate the refundable Quebec abatement if one of the following situations applies to the trust:

• the trust was a resident in Quebec and had income from a business with a permanent establishment outside Quebec
• the trust resided outside Quebec and had income from a business with a permanent establishment in Quebec

Enter the result on line 34 of Schedule 11.

Schedule 11A – Donations and gifts tax credit calculation

Use Schedule 11A to calculate the total donations and gifts tax credit.

Testamentary trust

Estate donations

Estate donations (donations made by will and designation donations) are deemed to be made by the individual’s estate and where certain conditions are met, by the individual’s graduated rate estate (GRE). See GRE donations on this page. The donations are deemed to be made at the time the property is transferred to the donee.

An estate can claim the donations and gifts tax credit in respect of a donation that is not a GRE donation or former GRE donation in the year in which the donation is made or in any of the five following years (or ten years for a gift of ecologically sensitive land made after February 10, 2014). However, the donation cannot be allocated to a tax year of the individual or an earlier year of the estate.

For deaths that occurred before 2016, gifts bequeathed in the deceased person’s will and designation donations were deemed to be made by the individual immediately before their death. For more information on gifts where death occurred before 2016, see the T3 Trust Guide for the 2015 tax year.

GRE donations

GRE donations are donations by a GRE to a qualified donee. The donated property must be property that was acquired by the estate on and as a consequence of the death (or property that was substituted for such property). GRE donations also include designation donations.

You can allocate a GRE donation among any of:

• the tax year of the GRE in which the donation is made
• an earlier tax year of the GRE
• the last two tax years of the deceased individual (the final return and the return for the preceding year)

In addition, a gift made after the 36 month period but within 60 months after the date of death by a former GRE that continues to meet all of the requirements of a GRE except for the 36 month time limit, can be allocated among any of:

• the tax year of the estate in which the donation is made
• an earlier tax year of the estate, if the estate is a GRE in that preceding year
• the last two tax years of the deceased individual (the final return and the return for the preceding year)

If the donation is not a one-time payment (for example, a donation that will continue to be made according to the terms of the will), treat the recipient as an income beneficiary and deduct the donation as an allocation of trust income on line 28 of the T3 return. You also have to include the donation on the appropriate line of Schedule 9.

Inter vivos trust

If the recipient is an income beneficiary according to the terms of the trust agreement, deduct the donation on line 28 of the return, and include it on the appropriate line of Schedule 9.

If the trust donates an obligation of the trust or of a related person, a share issued by a corporation related to the trust, or any other security issued by a person related to the trust, call 1-800-959-8281.

A communal organization that made charitable donations can choose not to claim them and can elect to designate the donations to beneficiaries. For more information, see Information Circular IC78-5R, Communal Organizations.

Lines 1 to 3 – Donations to registered charities and other qualified donees

These lines include the eligible amount of all donations made to registered charities and other qualified donees in 2023 plus donations and gifts made in any of the previous five years that have not been claimed before. For a list of qualified donees, see Pamphlet P113, Gifts and Income Tax.

Line 4 – Donations applied to the last two years of the deceased individual (GREs and former GREs only)

Use this line to indicate the amount of previously unclaimed donations that you are currently applying to the last two tax years of the deceased individual (the final return and the return for the preceding year).

Line 5 – Total eligible amount of charitable donations (total of lines 1, 2, and 3 minus line 4)

This is the eligible amount of all donations made in any of the previous five years, which has not been claimed in any previous year and is not included on line 12. For more information, see Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.  

Line 6 – Donations limit

For donations of cash or other property to a registered charity or other qualified donee in the tax year, a trust’s total donations limit will generally be 75% of its net income for the year.

Lines 7 and 8 – Gifts of capital property (including depreciable property)

A trust can increase its total donations limit if it donates capital property in the year. For more information and how to calculate the amount to be entered on lines 7 and 8, see Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.  

Line 11 – Eligible amount of cultural and ecological gifts

Unlike other donations, your total eligible amount claimed for these types of gifts is not limited to a percentage of net income. You can choose the part you claim in 2023 and carry forward any unused part for up to five years.

For donations of ecologically sensitive lands made after February 10, 2014, the carry-forward period is up to ten years.

A gift of ecologically sensitive lands cannot be made to a private foundation after March 21, 2017.

For donations of certified cultural property, special rules apply when the property was acquired through a gifting arrangement that is a tax shelter.

For more information about these gifts and the amounts you can claim, see Pamphlet P113, Gifts and Income Tax, and Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.  

Line 12 – Amount of cultural and ecological gifts applied to the last two years of the deceased individual (GREs and former GREs only)

Use this line to indicate the amount of previously unclaimed cultural and ecological gifts that you are currently applying to the last two tax years of the deceased individual (the final return and the return for the preceding year).

Lines 16 to 30 – Donations and gifts tax credit calculation

The donation tax credit is computed as follows:

Trusts other than GREs or QDTs

For a trust other than a trust that is a GRE or QDT, the donation tax credit is the total of the following:

• The total eligible amount of gifts up to $200 multiplied by the lowest personal tax rate; and
• The total eligible amount of gifts over the $200 threshold multiplied by 33%.

Trusts that are GREs or QDTs

For a trust that is a GRE or a QDT, the donation tax credit is the total of the following:

• The total eligible amount of gifts of up to $200 multiplied by the lowest personal tax rate;
• If the trust's taxable income:
  • is less than or equal to $235,675, multiply the total eligible amount of gifts over the $200 threshold by 29%;
  • is greater than $235,675, calculate the total of "A" and "B", where:
    • "A" is 33% multiplied by the lesser of
      • the total eligible amount of gifts for the year that exceeds $200, and
      • the amount, if any, by which the trust's taxable income exceeds $235,675
    • "B" is 29% multiplied by the total eligible amount of gifts that exceeds the total of the $200 threshold and the amount used for calculating A.

Schedule 12 – Minimum Tax

If the trust is subject to a minimum tax, it may have to pay minimum tax in the year. The following types of trusts are not subject to minimum tax and do not need to complete Schedule 12:

• A spousal or common-law partner trust, a joint spousal or common-law partner trust, or an alter ego trust if it reports in the year its first deemed disposition on Form T1055, Summary of Deemed Dispositions (2002 and later tax years).
• If the trust was one of the following throughout the tax year:
  • a mutual fund trust
  • a related segregated fund trust
  • a master trust
  • an employee life and health trust

Minimum tax limits the tax advantage a trust can receive in a year from certain incentives. The most common situations that may make a trust liable to minimum tax are if it:

• reports taxable capital gains (line 1 of the return)
• reports taxable dividends (line 3 of the return)
• claims a loss resulting from, or increased by, resource expenditures, or claims resource and depletion allowances on resource properties (line 6 or line 11 of the return)
• claims a loss resulting from, or increased by, capital cost allowance (CCA) or carrying charges claimed on a rental or leasing property (line 8 of the return), or certified films or videotapes (line 6 of the return)
• has certain losses that limited partners, specified members of a partnership, or partners of a registered tax shelter deduct for their partnership interest (for this purpose, losses allocated from a partnership are applied against gains from the same partnership source)

• has losses from an investment in a registered tax shelter
• has carrying charges for interests in limited partnerships, tax shelters, rental or leasing properties, or film or resource properties, that increase or create a loss from these sources

The trust has to pay minimum tax if it is more than the federal tax calculated in the usual manner.

Alternative Minimum Tax

For 2016 and subsequent tax years, the $40,000 basic exemption is applicable to graduated rate estate only.

Provincial and territorial income tax ▲

Resident trusts

A trust is liable for provincial or territorial tax at the rate that applies for the province or territory of residence if it was a resident of a province or territory on the last day of its tax year. Use the applicable provincial or territorial tax form to calculate the provincial or territorial tax.

If the trust was resident in the province of Quebec on the last day of its tax year, see the note in the section called Which tax package should you use?

A resident trust may carry on a business with a permanent establishment in one of the following:

• a province or territory other than the province or territory of residence
• a foreign country

In these cases, you have to calculate the trust's income from each source to determine the liability for one of the following:

• provincial or territorial income tax
• federal surtax for income not subject to provincial or territorial tax

Report income from a business for each province, territory, or foreign country in which the business had a permanent establishment during the tax year. Send us a copy of this list. In general, you should allocate all other income to the province or territory of residence. Use Form T3MJ, Provincial and Territorial Taxes – Multiple Jurisdictions, to report this income. To get this form, see Forms and publications or call 1-800-959-8281.

A trust resident in a province other than Quebec, or in a territory, on the last day of its tax year may have a federal foreign tax credit that is less than the non-business income tax the trust paid to a foreign country. If this is the case, the trust can apply the excess of foreign non-business income tax paid against provincial and territorial tax.

For more information, see Line 23 – Federal foreign tax credit.

Non-resident trusts and deemed resident trusts

A non-resident trust or a deemed resident trust that carries on a business with a permanent establishment in a province or territory is subject to provincial or territorial tax on the business income it earned in that province or territory.

A non-resident trust or a deemed resident trust may carry on a business in Canada without a permanent establishment in Canada. In this case, it may be subject to the federal surtax. For more information, see Line 21 – Surtax on income not subject to provincial or territorial tax.

Schedule 15 – Beneficial Ownership Information of a Trust

As noted, for tax years ending on or after December 31, 2023 a trust (including a bare trust) that is required to file a T3 return, other than a listed trust generally must report beneficial ownership information on Schedule 15.

On Schedule 15, a trust will be required to report the identity of all trustees, settlors, beneficiaries and controlling persons (which are collectively referred to as reportable entities) of the trust. You must include information for all reportable entities of the trust that existed at any time during the tax year. This includes situations where the person became a reportable entity at any time during the tax year and where the person is no longer a reportable entity of the trust at the end of the tax year for which you are filing a T3 return.

The beneficial ownership information must be submitted on Schedule 15 – alternative methods, such as spreadsheets, PDF files or XML files will not be accepted. If you are filing the T3 return by paper, Schedule 15 must be used and multiple copies of Part B of the Schedule 15, if needed, can be mailed along with the T3 Return. The fillable PDF version of Schedule 15 allows additional Part B sections to be included.

For more information on the additional reporting requirements, go to New Trust Reporting Requirements.

Who is a settlor?

The term “settlor”, for purposes of the requirement to provide beneficial ownership information, is defined in subsection 17(15) of the Act:

Settlor in respect of a trust at any time means any person or partnership that has made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust at or before that time, other than, where the person or partnership deals at arm's length with the trust at that time,

          (a) a loan made by the person or partnership to the trust at a reasonable rate of interest; or

          (b) a transfer made by the person or partnership to the trust for fair market value consideration.

Identifying Beneficiaries

The term “beneficiary” for the purposes of Schedule 15 is based on its ordinary meaning. Generally, the determination of who is a beneficiary of a particular trust requires a finding of fact based on all the relevant information, including the terms of the trust and the settlor’s intent in establishing the trust. In essence, a beneficiary of a trust is a person (other than a protector) who has a right to compel the trustee to properly enforce the terms of the trust, regardless of whether that person’s right to any of the income or capital is immediate, future, contingent, absolute or conditional on the exercise of discretion by any person.

However, such a determination is ultimately dependant on the specific facts, terms of the trust as well as the relevant trust law.

The requirement to provide the necessary information in respect of beneficiaries of a trust on Schedule 15 will be met if the required information is provided in respect of each beneficiary of the trust whose identity is known or ascertainable with reasonable effort by the person making the return at the time of filing the return. If a beneficiary’s identity is known or ascertainable, complete Part B of Schedule 15. If a beneficiary’s identity is not known or ascertainable with reasonable effort, then the person making the return is required to provide sufficiently detailed information to determine with certainty whether any particular person is a beneficiary of the trust. In this case, complete Part C of Schedule 15.

Where the beneficiaries of a trust are all of the members of an Indigenous group, community or people that holds rights recognized and affirmed by section 35 of The Constitution Act, 1982, or an identifiable class of the members of such Indigenous group, community or people, provide a sufficiently detailed description of the class of beneficiaries to determine with certainty whether any particular person is a member of that class of beneficiaries.

Where some but not all of the units of a trust are listed on a designated stock exchange, the requirement to provide information in respect of the beneficiaries of the trust is met if the required information is provided in respect of the beneficiaries of the unlisted classes of units. 

Who is a controlling person

For the purposes of the trust reporting requirements, the term controlling person means a person who has the ability (through the terms of the trust or a related agreement) to exert influence over trustee decisions regarding the appointment of income or capital of the trust. This would include, for example, a protector of the trust.

For more information on the additional reporting requirements, go to New trust reporting requirements for T3 returns filed for tax years ending after December 30, 2023.

Completing Schedule 15

Part A – Annual beneficial ownership information

You must ensure both required questions of Part A on Schedule 15 have been completed.

If this is the first time you are providing the Canada Revenue Agency with the beneficial ownership information of the trust, you need to identify all the reportable entities of the trust.

If the trust is required to file Schedule 15, the schedule must be filed every year. Reportable entities that have been previously reported to the Canada Revenue Agency will be carried forward. When the details of an entity have changed, that new information must be submitted as a modification in Part B – Identification of reportable entities.

Part B – Identification of reportable entities

To add or modify the reportable entities of the trust, use Part B on Schedule 15. Include entities that may have been reportable for only part of the year.

Adding a reportable entity

For each reportable entity of the trust, the following information must be provided: 

• name
• address
• date of birth (if applicable)
• country of residence, and
• Tax Identification Number (i.e., Social Insurance Number, Business Number, Trust Number, or, in the case of a non-resident trust, the identification number assigned by a foreign jurisdiction)

If a reportable entity is more than one entity type, Part B must be completed in full for each respective entity type. For example, if an entity is both a Trustee and a Settlor, Part B will need to be filled out twice.

If a reportable entity was associated with the trust for only part of the tax year for which you are filing a tax return, select “Add reportable entity” and enter all of the relevant information. If the entity was no longer associated with the trust at the end of the year, select “Yes” to the question “Did the entity’s association with the trust end during the year?”

Modifying a reportable entity

To modify a reportable entity that is on file with the Canada Revenue Agency, select the box “Modify reportable entity” and complete Part B in full, do not just enter the information that you want to update.

Removing a reportable entity

To remove an entity, select “Modify reportable entity” and complete Part B in full. Select “Yes” for the question “Did the entity’s association with the trust end during the year?”

Chapter 4 – T3 slip and T3 Summary

As trustee, you have to complete a T3 slip, Statement of Trust Income Allocations and Designations (slip), for each resident beneficiary, including a preferred beneficiary, to whom the trust allocated income in the year. You must also do this for a trust that made any distributions of capital that would result in an adjustment to the adjusted cost base of the beneficiary's interest in the trust. If you allocated income to a non-resident beneficiary, see Column 2 – Non-resident.

This chapter provides information on how to complete the T3 slip. The T3 slip has three individual slips printed on each sheet. These are intended to be used for laser or ink jet printers, for typing, or to be completed by hand.

The T3 slip shows only the high-use boxes (boxes 12, 14, 16, 18, 21, 23, 26, 30, 32, 39, 49, 50, and 51). There are also six generic boxes with blank codes for less common amounts. If you have to use a generic box, enter the box number and the amount in the other information area.

If you need more than six boxes for the same beneficiary, use an additional T3 slip.

You can find a sample of the slip in the Appendix.

You do not have to complete a T3 slip for a beneficiary if the income allocated in the year to that beneficiary is less than $100. However, you have to notify the beneficiary of the allocated income since it still has to be reported on the beneficiary's return.

You have to complete a T3SUM, Summary of Trust Income Allocations and Designations, even if you only prepare one T3 slip. This is the form you use to record the total of the more common amounts you reported on all related slips. File only one summary for the trust, unless it is a mutual fund trust.

See the back of the T3 Summary for information on how to complete it. You can find a sample of the form in the Appendix.

How to file the T3 slip and T3 Summary ▲ 

Electronic filing methods

The threshold for mandatory electronic filing of trust-related information returns (T3 slips) for a calendar year has been lowered from 50 to 5 for information returns filed after December 31, 2023.

Filing by Web Forms

Our Web Forms application is free and secure. To use it, all you need is access to the Internet. With Web Forms you can complete a trust-related information return easily, following the step-by-step instructions.

Web Forms lets you:

• file up to 100 slips (original, additional, amended, or cancelled) from our website
• calculate all of the totals for the T3 Summary
• create a digital trust-related information return containing T3 slips and T3 Summary, which can be saved and imported at a later date
• print all your slips and your summary
• validate data in real time

After you submit your trust-related information return, you will receive a confirmation number that will be your proof that the CRA received it.

To use the Web Forms application, you must have a web access code. If you do not have a web access code, you can easily get one online or by calling us. For more information, see Web access code.

To start using this application or to get more information about Web Forms, go to Filing Information Returns Electronically (T4/T5 and other types of returns) - Overview.

Filing by Internet file transfer

Internet file transfer allows you to transmit an original or amended T3 summary and slips with a maximum file size of 150 MB. All you need is a web browser to connect to the Internet, and your software will create, print, and save your digital trust-related information return in XML format. For information about this filing method, contact your software publisher or go to Filing Information Returns Electronically (T4/T5 and other types of returns) - Overview.

Web access code

To file your T3 summary and slips over the Internet using the Internet file transfer or Web Forms service, you will need a web access code (WAC). If you have misplaced or do not have a WAC, go to Filing Information Returns Electronically (T4/T5 and other types of returns) - Overview to access our web access code online service. If you cannot get your WAC online or would like to change it, call the Business Enquiries line at 1-800-959-5525.

Filing on paper

If you file 1 to 5 slips, we strongly encourage you to file over the Internet using Internet file transfer or Web Forms. However, you can still file up to 5 slips on paper for returns filed after December 31, 2023.

If you need more paper copies, you can order a maximum of 9 single-page slips at Forms and publications or by calling 1-800-959-5525.

If you choose to file your return on paper, mail it to the following address:

Jonquière Taxation Centre
T3 Program
PO Box LCD 1300
Jonquière QC G7S 0L5

Complete one copy of the T3 slip for each recipient and send them with your T3 Summary. Enter the information for two different recipients on one sheet. This will let us process your information return faster. You must keep a copy of the T3 slips and the T3 Summary for your files.

Filing using computer-printed (customized) forms

For those who fill out a large number of T3 slips, we accept certain slips other than our own. For help on how to fill out the slips accurately, consult the guidelines for the production of customized forms at Customized forms or see the current version of Information Circular IC97 2R, Customized Forms.

If you are a mutual fund trust that files T3 slips by Internet, you can combine the income and capital gains from several funds onto one T3 slip for each unit holder. However, when you combine the slips, you have to do all of the following:

• submit a sample of the combined information slip requesting an approval number

• prepare the Internet submission of summary forms and slips, which you submit to us at the individual fund level
• write "Combined information slip" clearly on the T3 slip under the recipient name and address, and provide the unit holders with statements that allow them to reconcile the amounts reported on the combined information slips
• maintain an audit trail so the combined information slips can be verified if we audit these funds later

Distributing the T3 slip ▲

Send to the CRA the T3 slip along with the T3 Summary no later than 90 days after the end of the trust’s tax year end. See Tax year-end and fiscal period.

Do not staple the summary and slips to the T3 return.

Send two copies of the T3 slip to the beneficiary. You do not have to keep a copy of the T3 slips. However, when you file online, you have to keep the information from which you prepared the slips in an accessible and readable format.

You can provide recipients with a digital copy of their T3 slips only if the recipient gives you their consent in writing or by email.

If you fail to distribute the T3 slip or any other trust-related information slip to a recipient by the due date, you will be liable for a penalty. For more information, see Penalties and interest.

Amending, cancelling, adding, or replacing T3 slips

After filing your T3 slips, you may notice an error on a trust-related slip. If so, you will have to prepare an amended slip to correct the information. Provide copies to the recipient. Do not include slips that have no changes.

If you prepare and issue an amended T3 slip after you have filed the original slip with us, you may have to file an amended T3 Summary. If there is a change to the amounts in the boxes shown on the front of the summary, file an amended T3 Summary. If the amended T3 slip affects the amounts shown on the T3 Trust Income Tax and information Return, or on Schedule 9, Income Allocations and Designations to Beneficiaries, do not file another T3 return. Instead, send us a completed Form T3-ADJ, T3 Adjustment Request, or a letter providing the details of the change. Indicate the tax year you want us to change and send us any supporting documents. Include the trust's account number on the letter.

Amending or cancelling T3 slips over the Internet

To amend a T3 slip over the Internet, change only the information that is incorrect and retain all of the remaining information that was originally submitted. Use summary report type code "A" and slip report type code "A."

To cancel a slip, do not change any information that was contained on the original slip. Use summary report type code "A" and slip report type code "C."

For more information about amending or cancelling trust related information slips using the Internet, see Filing Information Returns Electronically (T4/T5 and other types of returns) - Overview.

Amending or cancelling T3 slips on paper

If you choose to file your amended return on paper, clearly identify the T3 slips as amended or cancelled by writing “AMENDED” or “CANCELLED” at the top of each slip. Make sure you fill in all the necessary boxes, including the information that was correct on the original slip. Send two copies of the slips to the recipient. Send one copy of the amended/cancelled slips to the CRA with a letter explaining the reason for the amendment/cancellation.

Adding T3 slips

After you file your T3 return, you may discover that you need to send to the CRA additional T3 slips. If you have original T3 slips that were not filed with your return, file them separately either online or on paper.

To file additional slips online, see Electronic filing methods.

If you file additional slips on paper, clearly identify the new slips by writing “ADDITIONAL” at the top of each slip. Send one copy of the additional slips to any tax centre. See Electronic filing methods for more information on adding slips over the Internet or go to Filing Information Returns Electronically (T4/T5 and other types of returns) - Overview.

Recipient identification number ▲

The recipient identification number is one of the following:

• the social insurance number (SIN) if the beneficiary is an individual (other than a trust)
• the business number and program account if the beneficiary is a corporation or a partnership
• the trust account number if the beneficiary is a trust

This section explains the special rules and penalties that apply to using SIN, business number and program account and the trust account number.

Trustee – Anyone who prepares an information slip has to make a reasonable effort to get the SIN, business number and program account, or trust account number from the person or partnership who will receive the slip. Unless you make a reasonable effort to get this information, you will be liable to a $100 penalty each time you do not provide the SIN, business number and program account, or trust account number on the information slip. This penalty does not apply if the person or partnership has applied for but has not yet received a SIN, a business number and program account, or trust account number when they file their return.

Beneficiary – Persons or partnerships have to give their SIN, business number and program account, or trust account number on request to anyone who has to prepare an information slip for them.

If the person or partnership does not have a SIN, business number and program account, or trust account number, both of the following rules apply:

• the person or partnership must apply for the number within 15 days of your request (the SIN from any Service Canada Centre, the business number and program account and trust account number from CRA)
• once the person or partnership receives the number, they have 15 days to give it to you

Persons or partnerships who, for any reason, do not comply with these requirements are liable to a penalty of $100 for each failure to give their SIN, business number and program account, or trust account number.

A beneficiary may have applied for but has not yet received a SIN, a business number and program account, or a trust account number, or the beneficiary may refuse to give you the number. In these cases, do not delay filling out the information slip beyond the filing due date. Depending on the type of beneficiary, if you have not received the SIN, business number and program account, or trust account number by the time you prepare the T3 slip, enter the following in box 12:

• beneficiary is an individual (other than a trust)
  Enter 000000000
• beneficiary is a business (sole proprietor, corporation or partnership)
  Enter 000000000RP0000
• beneficiary is a trust
  Enter T00000000

If you have to prepare an information slip, you, your employees, your officers, or your agents cannot knowingly use, share, or allow a SIN, business number and program account or trust account number to be shared without the person’s or partnership’s written consent, unless required or authorized by law. Any person who does so is guilty of an offence and, if convicted, may have to pay a fine or go to jail, or both.

For more information, see Information Circular IC82 2R, Social Insurance Number Legislation That Relates to the Preparation of Information Slips.

How to complete the T3 slip ▲

Type or print the information on the slip. Report all amounts in Canadian dollars. If an amount was paid in foreign funds at various times throughout the year, to get the applicable rate, go to Exchange Rate or call 1-800-959-8281.

If there is a preferred beneficiary election and other income is also allocated to the same beneficiary, complete one T3 slip for the elected income and a separate slip for all other allocated income.

You can get the information needed to complete boxes 21 to 51 from Schedule 9, Income Allocations and Designations to Beneficiaries.

Recipient's name and address – Enter the information in the white area provided. If the payment is to an individual, enter the beneficiary's name. If the payment is to a joint beneficiary, enter both names. If the payment is made to a trust, enter the name of the trust and not the names of the individual beneficiaries of that trust. If the payment is made to an association, organization, or institution, enter that name. Following the beneficiary's name, enter the beneficiary's full address including city and province or territory. Also include the postal code.

Year – Enter the applicable tax year at the top of the slip.

Trust year-end – Use a four-digit number to indicate the year, and a two-digit number to indicate the month of the trust's tax year-end.

Box 12 – Recipient identification number ▲

If the beneficiary is an individual (other than a trust), enter the individual’s social insurance number.

If the beneficiary is a business (sole proprietor, corporation or partnership), enter the 15 character program account number of the business.

If the beneficiary is a trust, enter the trust account number.

Box 14 – Account number

You have to enter the trust's account number, if we have assigned one. Do not leave this box blank. For security purposes, do not include the trust account number on the copies you provide to the beneficiary.

1 alpha, 8 numeric:

• T3 slip, box 14, example: T00000000
• trust account number assigned by the CRA
• must correspond to the "Trust account number" on the related T3 Summary record
• if you have not been assigned such a number, enter T00000000 in the field.

Box 16 – Report code ▲

Enter one of the following codes:

1 alpha

If you use code A or C, see Amending, cancelling, adding, or replacing T3 slips for more information.

Box 18 – Beneficiary code ▲

You have to enter one of the following codes to identify the type of beneficiary (do not leave this box blank):

Box 21 – Capital gains

Enter the result of the beneficiary's share of the amount from line 921 of Schedule 9, multiplied by 2.

For more information, see Line 921 – Taxable capital gains.

Box 23 – Actual amount of dividends other than eligible dividends ▲

Enter the beneficiary’s share of the amount from line 923 of Schedule 9.

If the beneficiary is an individual or a trust (other than a registered charity), see box 32 and box 39 for more instructions.

Box 26 – Other income▲

Enter the beneficiary's share of the amount from line 926 of Schedule 9. Include amounts such as the following in this box:

• death benefits
• retiring allowances
• pension income other than lump-sum pension benefits already included in box 22
• net rental income
• net business, farming, and fishing income
• interest income

Box 30 – Capital gains eligible for deduction

Only personal trusts complete box 30.

Enter the result of the beneficiary's share of the amount from line 930 of Schedule 9, multiplied by 2.

Where the trust has realized in its tax year both taxable capital gains which are eligible for a beneficiary’s capital gains deduction, and taxable capital gains that are not eligible, very generally, the rules ensure that a proportionate share of each of the eligible taxable capital gain, and the non-eligible taxable capital gain is allocated and designated to each beneficiary. Subsection 104(21.2) provides the formulas to determine the amount of eligible taxable capital gains to designate in respect of QFFP and QSBCS. Very generally, the effect of each of these formulas is that the amount designated to a particular beneficiary is equal to the beneficiary’s proportionate share of all the trust’s subsection 104(21) designations for the year to its beneficiaries in respect of its net taxable capital gains for the year, to the extent that the amount so calculated represents eligible taxable capital gains of the trust for the year from the disposition of QFFP or QSBCS (depending on which formula is being applied).

Where the amount in box 30 includes an amount that relates to a capital gain reserve claimed in the trust’s prior tax year and which is brought into the trust’s income in the current year, you must also include the following in the footnote area:

• the amount in box 30 that relates to the trust’s capital gain reserve being included in the trust’s income
• the tax year in which the trust disposed of the relevant capital property.

Where the amount reported in box 30 relates to more than one disposition of QSBCS or QFFP by the trust in the current or prior tax years, provide the above details for each property and year of disposition in the Footnotes.

For more information, see Line 930 – Taxable capital gains eligible for deduction.

Box 32 – Taxable amount of dividends other than eligible dividends ▲

If the beneficiary is an individual or a trust (other than a registered charity), enter the result of the amount of dividends other than eligible dividends from taxable Canadian corporations reported in box 23, multiplied by 1.15.

Do not include negative amounts when completing box 32 of the T3 slip.

Box 39 – Dividend tax credit for dividends other than eligible dividends ▲

If the beneficiary is an individual or a trust (other than a registered charity), enter 9.0301% of the amount in box 32.

Box 49 – Actual amount of eligible dividends ▲

Enter the beneficiary's share of the amount from line 949 of Schedule 9.

Box 50 – Taxable amount of eligible dividends ▲

If the beneficiary is an individual or a trust (other than a registered charity), enter the result of the amount of eligible dividends from taxable Canadian corporations reported in box 49, multiplied by 1.38.

Box 51 – Dividend tax credit for eligible dividends ▲

If the beneficiary is an individual or a trust (other than a registered charity), enter 15.0198% of the amount in box 50.

"Other information" area

This area on the T3 slip has boxes for you to enter codes and amounts for less common amounts, such as foreign business income, eligible death benefits, investment tax credits, and others.

The boxes are not pre-numbered as in the top part of the slip. Therefore, enter the codes that apply to the beneficiary.

If more than six codes apply to the same beneficiary, use an additional T3 slip. Do not repeat all the data on the additional slip. Enter only the beneficiary's identification number and name, as well as the trust's name and account number, and complete the required boxes in the "Other information" area.

Although the CRA’s position at this time is that we will not require the breakdown by country on the T3 slip, nor require the filing of multiple T3 slips, it is your obligation and responsibility to provide us with such information on request. Your records have to provide enough details to identify each foreign country and the amount of business income, in Canadian dollars, from each country.

Box 22 – Lump-sum pension income ▲

Enter the beneficiary spouse's or common-law partner's share of the amount from line 922 of Schedule 9.

Box 24 – Foreign business income

Enter the beneficiary's share of the amount from line 924 of Schedule 9 (before withholding taxes).

Box 25 – Foreign non-business income

Enter the beneficiary's share of the amount from line 925 of Schedule 9 (before withholding taxes).

Box 31 – Qualifying pension income ▲

Enter the beneficiary spouse's or common-law partner's share of the amount from line 931 of Schedule 9. This amount is included in box 26.

Box 33 – Foreign business income tax paid

Enter the beneficiary's share of the amount from line 933 of Schedule 9.

Box 34 – Foreign non-business income tax paid

Enter the beneficiary's share of the amount from line 934 of Schedule 9.

Box 35 – Eligible death benefits▲

Enter the beneficiary's share of the amount from line 935 of Schedule 9. This amount is included in box 26.

For more information, see Line 935 – Eligible death benefits.

Box 37 – Insurance segregated fund net capital losses

Enter the result of the beneficiary's share of the amount from line 937 of Schedule 9, multiplied by 2.

Box 38 – Part XII.2 tax credit

Enter the beneficiary's share of the amount from line 938 of Schedule 9.

For more information, see Schedule 10 – Part XII.2 Tax and Part XIII Non-Resident Withholding Tax.

Boxes 40, 41 and 43 – Investment tax credit

Effective for 2016 and subsequent years, only a graduated rate estate or a communal organization that is deemed to be an inter vivos trust can complete boxes 40, 41 and 43.

For each type of property or expenditure made by the trust in the year that is eligible for the investment tax credits (ITC), prepare a separate T3 slip for each designation to beneficiaries.

Box 40 – Investment cost or expenditures for investment tax credit

Enter the beneficiary's share of the amount from line 940 of Schedule 9.

Box 41 – Investment tax credit

Enter the beneficiary's share of the amount from line 941 of Schedule 9.

For more information, see Lines 940 and 941 – Investment tax credit (ITC).

Box 42 – Amount resulting in cost base adjustment

Enter the beneficiary's share of the amount from line 942 of Schedule 9. If this is a negative amount, put it in brackets.

Do not include new units issued to a beneficiary in satisfaction of a distribution of income. Instead, advise the beneficiary that you have issued these units, as well as the number of units and their value.

Box 43 – Investment tax credit – Code number

Enter the applicable investment tax credit code number (4B, 12, 6 or 7) and provide a statement to each beneficiary with the following description, as applicable, of the code number:

• Code 4B – Qualified expenditures for scientific research and experimental development (SR&ED)
  • Enter the Box 40 amount on line 67120 of Form T2038-IND, Investment Tax Credit (Individuals)

• Code 12 – Qualified property, or qualified resource property acquired after 2013 and before 2017 that is eligible for the transitional relief rate
  • Enter the Box 40 amount on line 67140 of Form T2038-IND.

For more information, go to Atlantic investment tax credit.

• Code 12 – Qualified resource property acquired in 2015 that is not eligible for the transitional relief rate
  • Enter the Box 40 amount on line 6723 of the 2015 version of Form T2038-IND and file it with your 2016 return.

• Code 6 – Apprenticeship job creation tax credit
  • Enter the Box 40 amount on the appropriate line of Part B of Form T2038-IND.

Box 45 – Other credits

Research and development tax credit

Enter the beneficiary's share of the amount from line 945 of Schedule 9.

Box 46 – Pension income qualifying for an eligible annuity for a minor ▲

Enter the beneficiary's share of the pension income that is eligible for a transfer to an eligible annuity for certain minors, from line 946 of Schedule 9 (also included in box 26).

Box 47 – Retiring allowance qualifying for transfer to an RPP or RRSP

Enter the beneficiary's share of the retiring allowance, which qualifies for a transfer to a registered pension plan or registered retirement savings plan, from line 947 of Schedule 9 (also included in box 26).

Box 48 – Eligible amount of charitable donations

Enter the beneficiary's share of the charitable donations or gifts of a communal organization, from line 948 of Schedule 9. For more information, see Information Circular IC78-5R3, Communal Organizations.

Appendix A – T3 slip and T3 Summary▲

T3 slip

Download a printable version of the T3 slip in PDF

T3 Summary

Download a printable version of the T3 Summary in PDF

Digital services

Digital services for individuals and trusts

The CRA's digital services are fast, easy, and secure!

My Account

My Account lets you view and manage your personal income tax and benefit information online. Find out how to register at My Account for Individuals.

Use My Account throughout the year to:

• view your benefit and credit information and apply for certain benefits
• view your notice of assessment or reassessment
• view uncashed cheques and request a replacement payment
• change your address, phone number, direct deposit information, marital status, and information about children in your care
• manage notification preferences and receive email notifications when important changes are made to your account
• check your tax-free savings account (TFSA) contribution room, your registered retirement savings plan (RRSP) deduction limit, and your first home saving account (FHSA) participation room
• track the progress of certain files you have submitted to the CRA
• make a payment online to the CRA with the My Payment service, create a pre-authorized debit (PAD) agreement, or create a QR code to pay in person at Canada Post for a fee. For more information on how to make a payment, go to Payments to the CRA.
• view and print your proof of income statement
• manage authorized representatives and authorization requests
• submit documents to the CRA
• submit an audit enquiry
• link between your CRA My Account and Employment and Social Development Canada (ESDC) My Service Canada Account
• manage multi-factor authentication settings

To sign in or register for the CRA’s digital services, which can be used to access the Trust account registration service, go to:

• My Account, at My Account for Individuals, if you are an individual
• My Business Account, at My Business Account, if you are a business owner or director
• Represent a Client, at Represent a Client, if you are an authorized representative

My Trust Account

My Trust Account allows you to view and update Trust account information including address, direct deposit, and authorized representatives. Find out how to register at About My Trust Account.

Access to the trust account

If you want online access to the T3 trust account, and to learn more about our online services, go to About My Trust Account.

With offline access to the T3 trust account, you can request information in writing by sending a letter to your tax centre at the address listed under "If the trust resides in:". Otherwise, information can be requested by phone as indicated under "If the trust resides in:" of this guide..

Receiving your CRA mail online

Set your correspondence preference to “Electronic mail” to receive email notifications when CRA mail, like your notice of assessment, is available in your account.

For more information, go to Email notifications from the CRA – Individuals.

Submitting and filing documents online related to T3

Trust  administrators and tax preparers can submit documents online related to the T3 Return for residents and non-residents. Sending documents through the "Submit documents online" service is secure, reliable, easy, and more efficient.

Documents you can submit online

The following documents can be submitted online for estates and trusts:

• Form T3APP, Application for Trust Account Number
• Form T3 ADJ, T3 Adjustment Request
• Supporting documentation requested within the current year T3 Return, including
  • Trust agreement
  • Schedule of Assets
  • Details of asset distributions to beneficiaries
  • Changes to beneficiaries
  • Details of non-arm’s length loans from or to beneficiaries and other parties
  • Details on private corporation shares held by the trust
  • Details on property contributions
• All supporting documents the CRA asks for to complete the T3 tax assessment or reassessment.

How to submit your document(s) online

You can submit documents online related to the T3 Return through two of the CRA’s secure portals:

• My Account for Individuals
• Represent a Client

To access the "Submit documents" service online, trust administrators must log into My Account for Individual using their social insurance number. Tax preparers and authorized representatives of trust administrators can also access the "Submit documents" service online by logging into Represent a Client.

Once in My Account, select “Submit documents” from the menu bar. Enter your reference or case number and click “next”. If you do not have a reference or case number click on the link “You may be able to submit documents without a case or reference number.”

Once in Represent a Client, select “Submit documents” from the menu bar. Select the client type or the program area you want to submit your electronic document to. If you have a reference or case number click “yes” and enter it on the next page. If you do not have a reference number click “no”.

After you submit your document(s)

After submitting documents, a confirmation page will display a confirmation, as well as a case or reference number for future communication regarding the documents.

Please note that the Canada Revenue Agency scan all documents submitted online for malware and viruses according to our and Shared Services Canada policies and standards.

If your documents are valid and contain no virus or malware, they will be sent to the appropriate area in charge of assessing T3 returns.

Supporting documents

You must send the following documents if they apply to the T3 return you filed online:

• elections
• designations
• agreements
• waivers
• special elective returns (including any supporting documents)
• Form T1135, Foreign Income Verification Statement

With the exception of Form T1135, you must send these documents to the tax centre serving the area the trustee resides in. You can send Form T1135 to the tax centre shown on that form. For more information, go to How to file a T3 return.

Keep all supporting documents (for example, books, records, forms, schedules, and receipts) you used to prepare a return for six years from the end of the tax year they relate to.

Reference or case numbers

You can submit documents electronically without a reference or case number. The "Submit documents" service will ask you, from a picklist, to choose the reason you are sending them.

If you want to send other documents related to the original submission, you will need to use the reference or case number you received after your initial submission.

Documents you can file through EFILE

• T3RET, T3 Trust Income Tax and Information Return
• T3ATH-IND, Amateur Athlete Trust Income Tax Return
• T3M, Environmental Trust Income Tax Return
• T3S, Supplementary Unemployment Benefit Plan Income Tax Return
• T3D, Income Tax Return for Deferred Profit Sharing Plan (DPSP) or Revoked DPSP
• T3P, Employees’ Pension Plan Income Tax Return
• T3RI, Registered Investment Income Tax Return
• T3GR, Group Income Tax and Information Return for RRSP, RRIF, RESP, or RDSP Trusts
• T1061, Canadian Amateur Athletic Trust Group Information Return
• T3PRP, T3 Pooled Registered Pension Plan Tax Return
• T2000, Calculation of Tax on Agreements to Acquire Shares (Section 207.1(5) of the Income Tax Act)
• Section 216 Returns

Documents you can file online

You can use the Canada Revenue Agency's secure Internet File Transfer service to send the following forms in XML format:

• T3SUM, Summary of Trust Income Allocations and Designations
• T3, Statement of Trust Income Allocations and Designations

For more information, go to Submit documents online.

Filing by Internet file transfer

Web access code

To file your T3 summary and slips over the Internet using the Internet file transfer, you will need a web access code (WAC). If you have misplaced or do not have a WAC, go to Filing Information Returns Electronically (T4/T5 and other types of returns) - Overview to access our web access code online service. If you cannot get your WAC online or would like to change it, call the Business Enquiries line at 1-800-959-5525.

For more information

Taxpayer Bill of Rights

The Taxpayer Bill of Rights (TBR) describes and defines 16 rights and builds upon the CRA’s corporate values of integrity, professionalism, respect, and collaboration. It describes the treatment you are entitled to when you deal with the CRA. The TBR also sets out the CRA Commitment to Small Business to ensure their interactions with the CRA are conducted as efficiently and effectively as possible.

For more information about your rights and what you can expect when you deal with the CRA, go to Taxpayer Bill of Rights.

If you need help

If you need more information after reading this publication, go to Taxes or call 1-800-959-8281.

Once a trust return is filed, the information on it becomes confidential. For this reason, we follow certain procedures before giving out information about the trust. Information can be given only to the trustee (or other legal representative, such as an executor, administrator, assignee, receiver, or liquidator) or an authorized representative. The authorized representative could be an accountant, lawyer, or tax preparer acting for the trustee. For information about authorizing a representative, go to Representative authorization. Although beneficiaries are entitled to information related to their personal tax situation, they are not entitled to information from us about the tax affairs of the trust.

Part XIII

If you need help

If you need more information after reading this publication, go to Taxes or call one of the following numbers:

• 1-855-284-5946, from Canada and the United States
• 1-613-940-8499, from outside Canada and the United States. The CRA only accepts collect calls made through telephone operator. After your call is accepted by an automated response, you may hear a beep and notice a normal connection delay. This service operates in Eastern Standard Time and is open Monday to Friday from 7:30 am to 8:00 pm.

Direct deposit

Direct deposit is a fast, convenient and secure way to receive your CRA payments directly in your account at a financial institution in Canada. For more information and ways to enrol, go to Direct deposit or contact your financial institution.

Forms and publications

The CRA encourages you to file your return electronically. If you need a paper version of the CRA's forms and publications, go to Forms and publications or call 1-800-959-8281.

Getting information by telephone

If you or your representative calls us, we will ask:

• for your name and address, and the date you were appointed as trustee
• whether a copy of the will, trust agreement, or letters of administration has been filed with us. If not filed, we will ask for a copy or for some other form of proof that will allow us to give you the information you need. If you have questions about the assessment of the trust's return, we may also ask you for information about the return
• for the date that your company was appointed as trustee, if you are an employee of a corporate trustee

Teletypewriter (TTY) users

If you use a TTY for a hearing or speech impairment, call 1-800-665-0354.

If you use an operator-assisted relay service, call the CRA's regular telephone numbers instead of the TTY number.

Giving or cancelling an authorization

For more information about authorizing a representative or cancelling an authorization already given, go to Representative authorization.

The authorization, or cancellation of an authorization, should include all of the following:

• the name and account number of the trust
• your representative’s name (individual or firm) and telephone number
• your signature as the authorized signing person (trustee, executor, administrator, or liquidator), telephone number, and the date

This service operates in Eastern Standard Time and is open Monday to Friday from 7:30 am to 8:00 pm.

Use Form AUT-01, Authorize a Representative for Offline Access, to authorize a representative, and Form AUT-01X, Cancel Authorization for a Representative, to cancel a representative. Mail either form within six months of signing to the appropriate CRA tax centre listed on the form.

If any of the legal representatives are deceased or no longer wish to act as a legal representative, make sure to include the death certificate or a letter of renunciation from each legal representative.

You have to complete a separate written authorization or consent form for each representative appointed or cancelled. 

Web access code

In October 2023, the Web Access Code digital service will be enhanced to allow information return filers to create, view, replace, or inactivate their web access code. For more information, or to obtain your web access code, go to Before you start - Online Web access code.

CRA service feedback program

Service complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the CRA. For more information about the Taxpayer Bill of Rights.

You may provide compliments or suggestions, and if you are not satisfied with the service you received:

1. Try to resolve the matter with the employee you have been dealing with or call the telephone number provided in the correspondence you received from the CRA. If you do not have contact information, go to Contact the Canada Revenue Agency
2. If you have not been able to resolve your service-related issue, you can ask to discuss the matter with the employee’s supervisor
3. If the problem is still not resolved, you can file a service-related complaint by filling out Form RC193, Service Feedback. For more information and to learn how to file a complaint, go to Service Feedback

If you are not satisfied with how the CRA has handled your service-related complaint, you can submit a complaint to the Office of the Taxpayers’ Ombudsperson.

Formal disputes (objections and appeals)

You have the right to file a formal dispute if you disagree with an assessment, determination, or decision.

For more information about objections and related deadlines, go to File an objection.

Reprisal complaints

If you have received a response regarding a previously submitted service complaint or a formal review of a CRA decision and feel you were not treated impartially by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.

For more information, go to Reprisal Complaints.

Index