16 May 2024 External T.I. 2023-0986981E5 - Reg 204.2 for trusts that wind up in 2023

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Is a trust, other than a GRE, required to provide the additional information outlined in subsection 204.2(1) of the Regulations if it has been wound up between January 1, 2023 and December 30, 2023?

Position: Yes.

Reasons: The law. See below.

XXXXXXXXXX									2023-098698
										Aleksandra Bogdan

May 16, 2024

Dear XXXXXXXXXX:

Re: Application of Section 204.2 of the Regulations

This is in reply to your correspondence of July 25, 2023, wherein you requested our views on the application of section 204.2 of the Income Tax Regulations (“Regulations”) to a trust, other than a graduated rate estate (“GRE”), that was wound up between January 1, 2023 and December 30, 2023. In this regard, you have inquired whether the trust would be required to provide the additional beneficial ownership information outlined in subsection 204.2(1) of the Regulations with its 2023 T3RET Income Tax and Information Return (“T3 Return”), even though the trust wound up prior to the end of the calendar year.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) (footnote 1) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

For taxation years ending on or after December 31, 2023, generally, where a trust is required to file a return of income pursuant to subsection 150(1) for a taxation year, subsection 204.2(1) of the Regulations requires that certain additional beneficial ownership information is required to be filed in respect of the trust on Schedule 15 of the T3 Return, unless the trust meets one of the exceptions described in paragraphs 150(1.2)(a) to (o). (footnote 2)

Paragraph 249(1)(c) defines a taxation year of a trust, other than a GRE, to be a calendar year. In the year that such a trust is wound up and the final distribution of assets occurs, there is no provision that would cause the taxation year to be a period other than a calendar year, regardless of when the period of accounts cease.

Accordingly, a trust, other than a GRE, that is wound up in the 2023 calendar year would have a taxation year ending on December 31, 2023. Therefore, if such a trust is required to file a T3 Return pursuant to subsection 150(1), and is not a trust described in any of paragraphs 150(1.2)(a) to (o), the additional information outlined in subsection 204.2(1) of the Regulations is also required to be provided by completing and including Schedule 15 with the 2023 T3 Return.

We trust our comments will be of assistance.

Yours truly,

Marina Panourgias, CPA, TEP
Manager, Trust Section I
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 Unless otherwise stated, every reference herein to a part, section, subsection, paragraph or a subparagraph is a reference to the relevant provision of the Act.

2 Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024, includes the addition of proposed paragraph 150(1.2)(p), applicable to taxation years that end after December 30, 2023.