Return for income from a graduated rate estate
You can file an optional return for a deceased person who received income from a graduated rate estate (GRE). The GRE may have a fiscal period (tax year) that does not start or end on the same dates as the calendar year. If the person died after the end of the fiscal period of the GRE, but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.
On this return, report the income for the time from the end of the fiscal period to the date of death. If you choose not to file this optional return, report all income from the GRE on the Final return.
A husband gets income from a testamentary trust with a fiscal year from April 1 to March 31. The trust was formed as a result of his wife's death on March 31, 2019 and designates itself as a GRE of the wife in its return of income for March 31, 2020. The husband died on June 11, 2020.
You have 2 choices when you report the husband's income from the trust:
- Include the husband's income from the GRE from April 1, 2019, to June 11, 2020, on his final return
- File a return for income received from the GRE in addition to the final return
On the husband's final return, include the income from the GRE from April 1, 2019, to March 31, 2020.
On the optional return for income from the GRE, report the income from April 1, 2020, to June 11, 2020.
How to file - If you decide to file a return for income from a graduated rate estate, you will need to:
- Get an Income Tax and Benefit Return
- Write "104(23)(d)" in the top right corner of page 1 of the return
- For instructions on completing a return, see How to complete the final return
You have to file this optional return and pay any amount owing by the later of:
- April 30, 2021 (or June 15, 2021, if the deceased was a self-employed individual, although any balance owing is still due on April 30)
- 6 months after the date of death
Do not confuse the optional return for income from a graduated rate estate with the T3 Trust Income Tax and Information Return, described in the responsibilities of the Legal representative. After someone dies, a will or a court order may create a trust, and the trustee, executor, or administrator may be required to file a T3 return. Also, an individual may be required to file a T3 return to report income earned after the date of death or for CPP or QPP death benefits. For more information, see Chart 2 and the T4013, T3 Trust Guide.
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