T3 (Trust Income Tax and Information Return)

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adrian2
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Re: T3 (Trust Income Tax and Information Return)

Post by adrian2 »

AltaRed wrote:Also, I suppose you know that if the T3 trust return has capital losses, you can make an election (with a letter) requesting that those losses be carried back to the Final T1 return to offset cap gains there.
Also keep in mind that outstanding capital losses (including carry forwards) in the year of death can be deducted against regular income (not only capital gains) in the year of the death and/or preceding year.
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Re: T3 (Trust Income Tax and Information Return)

Post by amphitryon »

Final update for those interested: It's been a year since both taxpayers for whom I am executor, had died, and I received last Friday the final assessment T1 and T3 for one of them; all good, nothing owing.
For the second one I only received the T3 final ( $ 12.65 owing). The T1 is still not back, since there's still a T1 adjustment from 2014 and 2015 open (they just got to it about a month ago). This too should be resolved quickly, after I re-sent the forms.

Considering I filed all six returns (three each) on March 6th 2017, this is pretty good in my opinion. And as soon as this is complete, I will request the clearance certificates for both and pay out the initial hold-back. I was also able to conclude the matter with the German tax folks, once I had a name and e-mail address. :)
I'like to thank again the members on this forum and especially AltaRed for excellent advice.
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Re: T3 (Trust Income Tax and Information Return)

Post by rharvey199 »

just rec'd the trust assessment from CRA. exactly the same amount as i calculated so good news. thanks again for everyone's help with this.
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Re: T3 (Trust Income Tax and Information Return)

Post by cruiseship »

Could someone clarify this? I read in this string that interest earned in TFSAs have to be claimed by the beneficiaries after the death of the owner of the TFSA. Is this correct
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

cruiseship wrote: 08 Aug 2017 16:14 Could someone clarify this? I read in this string that interest earned in TFSAs have to be claimed by the beneficiaries after the death of the owner of the TFSA. Is this correct
If the TFSA has matured because there is no successor holder, i.e. not transferred over to a spouse, then yes, any income and cap gains/losses earned in that account after date of death and before the proceeds are distributed to beneficiaries is subject to taxation. What I did as an executor was to pass the income through to the beneficaries making that income taxable in the hands of the beneficiaries. I didn't create T3 tax slips...just asked the beneficiaries to declare the income in their tax returns.
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Re: T3 (Trust Income Tax and Information Return)

Post by DavidR »

My brothers and I were named as beneficiaries of our mother's TFSA. The bank (RBC) sent us each a cheque for our share of the account. The bank also sent us each a T slip for our share of the income earned in the account after her death.
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Re: T3 (Trust Income Tax and Information Return)

Post by amphitryon »

For those interested, I found a new wrinkle in the processes of the CRA. A few posts above I noted that I had almost all final matters settled for one deceased, but was still waiting for a few items with regard to the second person (my mother in law), for whom I was also doing the ''tax part''.

While I received a reply (to our address!!) with regard to the T3 for her ( all was good), I had heard nothing with respect to the final T1 and the T1 Rights and Things I had filed. Since there also was still a T1 Adjustment outstanding for the 2014 tax year, I decided to call last Friday, to see where we were with respect to this matter. Prior to this call I had received a request for more info regarding this Adjustment, which I immediately followed up with two more pieces of info. This request came to our address!!

I also should state, that after mothers death, we immediately informed the CRA and changed the address for all communication to our (my wife's) address, since she and her brother are joint executors. Mother's condo was sold in the same year of her death and we had a one year mail forwarding in place.
When we called past Friday re. the outstanding T1 adjustment, we were told that the address for communication was changed and it was not ours: the operator would not tell us how and when, just insisted we should again send in a request for an address change for the estate. Even telling her that we did this immediately after death, she kept simply repeating to re-do this, and ''have a nice day''.

This did not sit well with me and I decided to place another call and ask for a supervisor. The gentleman we then got to speak with was extremely good, listened to our story and clued in immediately: even if you change the address for correspondence re. a deceased person, when they eventually get around to the final T1 (which is in the following calendar year), they change the address back automatically to what the final T1 states, which is the correct address for the deceased taxpayer at that time. Hence all their communication went back to an old condo address, and who knows what they did with it; we did not get any forwarding.

While I understand CRA's reason for taking the address from the last return, in the case of a deceased person a notification of an address change for communication to the executor's/estate address should stand. Any comments before I go after a policy change?

On Monday we will make another trip out of town to getting again a signature for the address change from the other executor and will fax it in on Tuesday, hoping they will not send the expected cheque from the T1 adjustment, which they told us they are working on (!!), again to the old address.I also still want the Notice of assessment for the final and R &T return. I was told I would get a copy, as soon as they had the new change of address again. I should add that we avoided this mess with respect to the other deceased, since we had changed his address way back while he still was living in a home and we took care of his affairs. We were lucky there. Got to love bureaucracy!
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

It is a case of the right hand not knowing what the left hand is doing. These things are processed in silos, estate returns done in a different location than normal returns, and for all I know, T3 trust returns being processed in yet another location. You would have thought though that all materials, including T1 adjustments on prior returns, are related to T1 returns in general and that one address change would automatically revert everything to the current (latest) address on file. :roll: The same is not necessarily true for T3 returns. The trust could be managed by an individual at a different address....even province and thus residency of the trust is in the province of the manager.

Who knows what they use for systems. Perhaps carrier pigeons and folks in trenches.
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Re: T3 (Trust Income Tax and Information Return)

Post by kcowan »

We submitted a change of address for MILto Canada Post and kept it going until everything was resolved. We have had cases where mail to our proper address is returned (don't ask!). In the case of our property insurer, they were quite upset but did track us down to our old original address.
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Re: T3 (Trust Income Tax and Information Return)

Post by amphitryon »

kcowan wrote: 04 Sep 2017 08:58 We submitted a change of address for MILto Canada Post and kept it going until everything was resolved.
Point well taken! Good to know for future experiences, if any.

What made us believe all was in order, was a recent letter from CRA to the correct address, regarding the T1 adjustment, asking for more info. Looks like mind games in retrospect. :)
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Re: T3 (Trust Income Tax and Information Return)

Post by OnlyMyOpinion »

T3 Graduated Rate Estate Return
Trying to sort through the T3 chaff, and get ahead of a T1 Final return that will be filed in Q1/19 for 2018 tax year that will have a taxable capital gain. Meanwhile the T3 return for the same year will report a capital loss. This is because the same mutual fund that provided the T1 cg from a non-reg acc, dropped in value from date of death to date (DOD) of selling in the same non-reg acc.

Now, the same fund in a TFSA acc lost some value from DOD to selling as well. But I understand that loss is not usable (and had a capital gain occurred, it would have been treated as other income by the T3).

So based on some of the great earlier comments in this thread and my reading, am I correct in understanding that:
1. The non-reg acc capital loss on the T3 can be transferred to the T1 to help offset its gains.
2. The T3 needs to be coded as a “903” Graduated Rate Estate (GRE) to do this.
3. I need to include a letter explaining this transfer between returns as a 164(6) election. It also seems prudent to provide a ‘for information only’ copy of the T3 for the T1 processers, and visa versa for the T3 processors.

The section below from https://www.canada.ca/en/revenue-agency ... P908_97861 applies and seems pretty straight forward.

Am I on the right track here?
----------------------------------------------------------------------------------------------------------
Graduated rate estate elections (losses)
For 2016 and subsequent tax years, if you are a legal representative administering the graduated rate estate of a deceased person, you may:
• elect under 164(6) to treat certain capital losses and terminal losses, arising in the first tax year of the deceased person’s graduated rate estate, as losses of the deceased person for that person’s final tax year
• elect under 164(6.1) to carryback certain amounts relating to employee stock options, arising in the first tax year of the deceased person’s graduated rate estate, to be deducted in computing the deceased person’s income for that person’s final tax year
Prior to January 1, 2016, these elections were available to all estates. However, effective January 1, 2016, these elections are only available to an estate that is a graduated rate estate.
These elections apply only to the first tax year of a deceased person’s estate. The elections do not affect the return of the deceased person for any year before the year of death.
Due date of election and amended final T1 return
In addition to filing the election you are also required to file an amended final T1 return of the deceased person to give effect to the rules. Both the election and amended final T1 return must be filed by the later of:
• the filing due date of the deceased person’s final T1 return that the legal representative is required to file or has elected to file
• the filing due date for the estate’s T3 return for its first tax year
When filing the amended T1 return, you must clearly identify the amended final T1 return of the deceased person as a 164(6) election or a 164(6.1) election.
164(6) Election
Generally, you can make this election for:
• all or any portion of the capital loss (to the extent the graduated rate estate’s capital losses exceed its capital gains) resulting from the disposition of the graduated rate estate’s capital property as reported on Schedule 1
• all or any portion of the terminal loss (not exceeding the total of the graduated rate estate’s non-capital loss and farm loss before the election) resulting from the disposition of all of the depreciable property of a prescribed class of the graduated rate estate
If you are making an election under 164(6) for the graduated rate estate, attach the following to the T3 return:
• a letter indicating that you are making an election under 164(6) and providing all of the following information:
o the amount of the capital loss you elect to be a capital loss of the deceased person
o the amount of the terminal loss you elect to be deductible in computing the income of the deceased person
• a schedule with details of the capital loss
• a schedule with the details of the terminal loss and a statement of the amounts that would have been the non-capital loss and the farm loss of the estate for its first tax year had the election not been made
The graduated rate estate cannot claim a loss that you have elected to transfer to the deceased person's final T1 return. However, you have to report the dispositions of the estate property on Schedule 1. If the total is a loss, enter the amount elected under subsection 164(6) on line 19.
Tax Tip
If you know you want to apply a loss to the deceased person’s final T1 return before that return is due to be filed, you can submit a request to apply the loss with the return. Clearly identify the return as a 164(6) election. Although we will not allow the claim on the initial assessment of the T1 return, we will hold your request until we assess the T3 return and verify your claim. If we accept your claim, we will adjust the T1 return, and issue a notice of reassessment.

Other GRE discussion:
https://www.canada.ca/en/revenue-agency ... s.html#GRE

https://www.canada.ca/en/revenue-agency ... rules.html
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

Short answers based on my prior experience....
1. Yes
2. I believe so - this GRE started in 2016.
3. Yes, but I did not attach anything with the Final T1. Everything went with the T3, see below. My experience is CRA processes Final T1 first before doing anything else.

The Final T1 and the T3 Trust returns I did in 2015 (before GRE returns) was straight forward. The Final T1 went in as usual showing the 'deemed disposition' of a mutual fund which had a Schedule 3 cap gain along with a cheque for tax due. With the T3, I included a letter requesting via 164(6.1) election to transfer the capital loss from that same fund back to the T1 Final and I did attach a copy of the Final T1 with the T3.

How it unfolded: The Final T1 was assessed within about 3 months I seem to remember. The T3 for the testamentary trust was assessed some months later. The election request to carryback the T3 capital loss to the Final T1 took several more months to be processed and a refund issued. I forget timelines overall, but it was well over a year I believe for it to all come together.
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Re: T3 (Trust Income Tax and Information Return)

Post by OnlyMyOpinion »

Thanks for the reply AltaRed.
Wading through a 76 page T3 trust guide that speaks of 32 trust types, just to uncover the requirements of a simple 'estate return', reminds me how user-unfriendly the CRA is.
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Re: T3 (Trust Income Tax and Information Return)

Post by Yasehtor »

I am so thankful to have found this thread as I am the executor of an estate and the informed conversation here has helped me to wade through the taxation quagmire..

In the situation I am dealing with the death occurred in Jan 2018 and there is the CPP Death Benefit, TFSA, RRIF and Investment Account to deal with. Between the date of death and the the payout to beneficiaries (TFSA and RRIF) and heirs (Investment Account) there was a decline in the value of the assets in all three. Based on what I have read in this forum and my readings of the CRA guides I plan to handle the tax filings as follows:

1. Prepare final return for deceased. Claim income received to DOD, except last month CPP and OAS (Jan 2018). Capital gains to be reported on the deemed disposition of the investment portfolio at DOD.

2. Prepare Rights & Things return for last month of CPP and OAS (Jan 2018).

3. Prepare T3 Trust Return for for CPP Death Benefit.

4. RC249 should be issued by RRIF Company and this can be claimed on final T1 of deceased for the decline in value of the RRIF prior to distribution.

5. On T3 report a Capital Loss on the Investment portfolio from DOD to date they were cashed and send a letter to CRA indicating the Capital Loss is being reported on the T3, but requesting it be applied to the final T1 of the deceased.

6. For TFSA company should issue T slips for any income between DOD and payment to the beneficiaries so that should not a concern for the estate; however, the capital loss between value at DOD and dated the investments were liquidated can be claimed by the beneficiaries on their personal T1, so it will be necessary to advise them of the details to make the proper claim on their returns.

7. After all returns are filed submit a request for a Clearance Certificate.

8. A lawyer has suggested getting a release from all heirs to the estate.. Probably a good idea, but is it necessary given the family is very close and there have been no issues during the last 11 months since the death and I do not foresee any problems so not sure it is needed.

9. I plan on making an interim payment once the tax returns are done but keeping a healthy holdback until the Clearance Certificate is obtained from CRA.

I think I have covered all the bases as I see it above. However, I would appreciate any comments on the process I plan on taking or any other steps that are required.

Thanks.
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

I cannot comment on the capital losses in your 4. and 6. because I didn't experience those situations when I processed an estate.

Re: your 7. Not right after all returns are filed. Do it after receiving the NOAs from said filed tax returns See Step 3 https://www.canada.ca/en/revenue-agency ... efore.html

Everything else seems appropriate.
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Re: T3 (Trust Income Tax and Information Return)

Post by Yasehtor »

Thanks AltaRed for the correction on the timing of requesting the Clearance Certificate.

Now for all of those out there that think its an honour to be named Executor............Think Again...LOL.
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Re: T3 (Trust Income Tax and Information Return)

Post by amphitryon »

. I plan on making an interim payment once the tax returns are done but keeping a healthy holdback until the Clearance Certificate is obtained from CRA.
Absolutely!!
I also would get a ''release form'' signed in exchange for each cheque issued; just good practice, no matter how much love there's among the troops.
And one more point from experience - if you charge a fee as executor, be prepared for a nice ''dance'' with CRA; take this fee last, after all else is done and paid out, and choose a suitable year for taking it; only then you must report it as income on your own return and pay tax.
(The filing of a T4 is not due until February 28th of the year following the year the fees are paid).
The ''problem'' is, you become an employer of sorts and will have to issue a T4 to yourself from the estate and then get CRA to stop asking you for quarterly payments and ''employee contribution'' instalments. Took me a while........
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Re: T3 (Trust Income Tax and Information Return)

Post by Yasehtor »

amphitryon wrote: 29 Dec 2018 22:42
. I plan on making an interim payment once the tax returns are done but keeping a healthy holdback until the Clearance Certificate is obtained from CRA.
Absolutely!!
I also would get a ''release form'' signed in exchange for each cheque issued; just good practice, no matter how much love there's among the troops.
And one more point from experience - if you charge a fee as executor, be prepared for a nice ''dance'' with CRA; take this fee last, after all else is done and paid out, and choose a suitable year for taking it; only then you must report it as income on your own return and pay tax.
(The filing of a T4 is not due until February 28th of the year following the year the fees are paid).
The ''problem'' is, you become an employer of sorts and will have to issue a T4 to yourself from the estate and then get CRA to stop asking you for quarterly payments and ''employee contribution'' instalments. Took me a while........

I am not charging a fee for my role as executor... not worth the bad feelings it might create in the family as there is nothing in the will that provides for it. At least setting up a payroll account and issuing a T4 is one thing I won't have to do. Your comments on the release do make sense... I may re-think my position on that as everything is on my shoulders if there is a claim against the estate and I have paid out the proceeds.. Thanks.
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Re: T3 (Trust Income Tax and Information Return)

Post by SLeazebag »

With respect to item 3 of your list, the T3 Trust return should, of course, also include any investment income earned in the Investment Account after the DOD. My experience (BMOIL) was that the discount broker only issued one T5/T3 covering the investment income earned in the Investment Account for the year and it was up to the executor(s) to split the investment income into the necessary two components ( earned before DOD and earned after DOD). Not all that complicated to do but it does involve some calculations for any GICs and bonds that may be in the Investment Account.
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

In my case, I asked the brokerage (RBC DI) to prepare a letter with market values (including compound GICs) on the DOD. It took them a month or so to generate that letter (which I attached to the relevant tax returns) to establish appropriate values. No need to do any of that stuff yourself.
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Re: T3 (Trust Income Tax and Information Return)

Post by SLeazebag »

I was basically talking about investment income earned before and after the DOD rather than the market values per se. I don't think you can get this simply from the market values as at the DOD. For compound GICs, if the face plus accrued interest as at DOD is taken as market value, then I agree that this is all that one needs for GICs in order to separate the investment income into its two components. This basically assumes that you can't get a capital gain or loss on a GIC. However, if interest rates have decreased since the GIC purchase, the GIC market value would be more than face plus accrued interest. BMOIL provided me with a market value for the GICs (that could be realized in the secondary market - perhaps the value that BMOIL would be willing to pay for each GIC) and this market value was higher than face plus accrued interest. Consequently, in my case, the deemed disposition at DOD for the GICs produced both interest income and capital gain.
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

I used the inappropriate term for some things, i.e. I asked RBC-DI to provide GIC values with accrued interest to DOD. The secondary market for GICs is too fickle to mess around with and CRA doesn't care. Had no bonds so the question of bid or ask did not arise.

Equites/MFs were valued at market close on DOD, and yes, I agree investment income has to be divided up for the Final T1 and the T3 (not hard to do really from T3/T5 plus Annual Summary of Income and Expense).
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Re: T3 (Trust Income Tax and Information Return)

Post by OnlyMyOpinion »

I was on hold waiting for a CRA rep for over 2 hrs today before it said it was 'unable to connect. call back later'. :ugeek:

Does anyone have recent experience sending both the T3 GRE and T1 Final in the same envelope to Sudbury for processing, including a letter requesting the 164(6) election, and doing this without* a trust acc number assigned?

*Poorly written CRA info suggests it might be needed from 2018 onward before submitting?
Per "Trust account number - Trustees can now apply for a trust account number before filing their T3 Trust Income Tax and Information Return... Production of trust account number - For 2018 and subsequent taxation years, where a trust files any return under the Act, it has to provide the trust account number that is assigned to it.
Failure to provide the trust account number - For 2018 and subsequent taxation years, where someone makes a request for the trust account number to prepare an information return under the Act, failure to provide the information will result in a penalty of $100 for each such failure."


I'm going to interpret the above however to mean that if I have a trust acc #, I need to provide it - not that I need to have one before I send in the T3 GRE :?
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Re: T3 (Trust Income Tax and Information Return)

Post by AltaRed »

That is the way I'd interpret it. Most executors wouldn't know to apply for a Trust number in advance, and it seems to be a silly duplication of effort.

P.S. Regarding both returns in the same envelope? I forget what I did but I think there were two different addresses to send them too when I did it. I did send them at the same time though with the same letter for the capital loss election.

Additional thought: I also did a 'Rights and Things' return for the OAS and CPP that came in after date of death rather than include it in the Final T1. Saved some tax that way though there was a bit of screw up because I had to divy up the T4As between the Final T1 and Rights and Things return and the CRA clerks didn't key it in that way.... :roll:
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Re: T3 (Trust Income Tax and Information Return)

Post by amphitryon »

In 2016, when acting as executor, and based on really good advice I got right here - most of it from AltaRed - I filed all three returns. The T3 return went to an Ottawa address, the other two (T1 and Rights and Things return) went to Sudbury. I filed all three at the same time and the T3 form did not have an ''account number'' yet (this was assigned then by CRA and communicated back via a ''T3 Assessment'').
It all worked like a charm and I simply paid the requested amount on the T3 Assessment.
The address for filing the T3 was as follows:
Ottawa Technology Centre
875 Heron Road
Ottawa ON K1A 1A2

Fax: 613-739-1147
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