The following seems to capture the logic of the trust reporting rules, as amended by the August 12, 2024, draft legislation, including the rules that will apply to “bare trusts” for years ending after December 30, 2025.
- Is the arrangement an “express trust” other than a bare trust? If it is, go to 4 below.
- Is the arrangement a “bare trust” ie an arrangement where a person who is the legal owner of property holds it for the benefit of another person, and “the legal owner can reasonably be considered to act as agent” for the other person (150(1.3))? If it is not, then no filing is necessary.
- Is the bare trust an excluded bare trust under subsection 150(1.31)? If it is, then no filing is necessary. If it is not, then the bare trust is treated as an express trust.
- In the year, did the express trust have tax payable, dispose of capital property or realize a taxable capital gain in the year? If it did, then it must file a tax return.
- Is the express trust a “listed trust” under subsection 150(1.2)? If it is, then no filing is necessary. If it not, then the trust must file a return even if none of the conditions in 4 above are met.
Under paragraph 150(1.31)(a) an arrangement is an excluded bare trust if each beneficiary of the trust is also a legal owner of the property of the trust and there are no legal owners who are not also beneficiaries. Adam Friedlan points out that
as established by the SCC in Pecore v. Pecore, 2007 SCC 17, it is possible for an account to be transferred into joint tenancy with a right of survivorship, but where the beneficial interest is held by the added joint tenants on resulting trust for the transferor and, following the death of the transferor, for the transferor’s estate.
Arrangements like these are quite common: for example, a child will often be a joint holder with a parent of a bank account, but the child will hold his or her interest in the account on a resulting trust for the parent. The parent is really the only beneficial owner of the account, which means the conditions in paragraph 150(1.31)(a) have not been met. See A Friedlan “Some Aspects of the Revised Bare Trust Reporting Rules” Tax For the Owner-Manager 25:1 (January 2025).
Of course, it is now unclear if and when the August 2024 amendments will be enacted.
