Tax year

Inter vivos trust

The tax year-end of an inter vivos trust is December 31, except for a mutual fund trust that elects 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.

Testamentary trust

The tax year-end of a testamentary trust may be, but does not have to be, December 31. The first tax period of the trust begins on the day after the person dies, and ends at any time you select within the next 12 months. The tax rates used, and the tax year of the slips issued to the beneficiaries, are based on the year-end of the trust.

You may prefer to choose a December 31 (calendar) year-end for a testamentary trust that will be a graduated rate estate in 2016 for several reasons:

• Availability of forms – The current-year trust returns and related schedules are usually not available until the end of the calendar year. A 2015 return due before the forms are available would have to be filed using a 2014 form, which might not contain current-year changes or information.

• Easier form completion – Generally, it is easier to complete forms and interpret rules when the tax year coincides with the calendar year.

• Availability of information – Most information slips for income amounts are issued for a calendar year (for example, a T5 slip for bank interest).

• Minimum delay in assessing the return – Changes to law generally requires changing the processing procedures for the return. If the return has a tax year ending early in a calendar year, we may have to delay assessing the return until the law is passed and the new procedures are in place.

However, there may be advantages to choosing a non-calendar year-end. Elections to transfer certain estate losses incurred and certain gains realized on employee security options during the first tax year of the trust to the deceased person’s return for the year of death, and the timing of income receipts may play an important role when you choose the trust’s tax year.

Once you establish the trust's year-end, you cannot change it without our approval. Requests will be approved only if the change is for sound business reasons. Normally, retroactive changes will not be approved. For more information, go to Change of fiscal year-end for trust.

A testamentary trust that becomes an inter vivos trust must start filing on a December 31 year-end from the beginning of its current tax year. After July 18, 2005, a trust in this situation will switch to a December 31 year-end the day it becomes an inter vivos trust.

Forms and publications

• Guide T4013, T3 Trust Guide
• Other Publications for Trust

Date modified:

2016-01-13