I spoke at an Ontario Bar Association conference on October 2 along with David Louis from Minden Gross (among others). David’s presentation included some discussion of the CRA trust audit initiative about which we’ve heard so much. David had contacted the CRA’s Toronto TSO about the initiative, and it told him the following:
- The initiative was initiated because of the Auditor General’s 2005 report, which recommended that the CRA give more attention to the audit of inter vivos trusts.
- In response to the report, the CRA created a “regional trust team” in the Golden Horseshoe. Garron and Antle had nothing to do with the initiative.
- What are auditors looking for? Apparently, the issues to be addressed include whether the trust was properly constituted (for example, can you find the trust’s gold coin?), the location of the trust’s residence (for example, where are Alberta trusts really resident, especially in light of Garron), whether the trust’s income is being reported properly and whether deductions were properly claimed.
- The CRA confirmed that the use of trusts for aggressive tax planning is a concern as well.
- The CRA stated that the initiative will continue because its activities so far have confirmed that trusts do present a significant compliance risk for the tax system.
