A personal trust may designate property held there as a personal residence while being eligible for the PRE. A testamentary trust is a type of trust that arises from or as a result of the death of a person (Income Tax Act, subsection 108(1)). A testamentary trust allows an individual to decide during his or her life, through his or her last will, who will benefit from his or her wealth and under what circumstances after his or her death. As a result, the last will of a deceased person sets out the terms of a testamentary trust (Hess v. The Queen). The 21-year disposition regime for trusts (including testamentary trusts) is set out in subsection 104(4) of the Income Tax Act of Canada. If a testamentary trust holds capital assets, subsection 104(4) assumes that the trust sells all of its capital assets at the fair value of the property and has promptly repurchased that property at fair value (i.e., costs corresponding to the alleged sale) every 21 years. The purpose of this deemed sale rule is to force the trust to record and tax its accumulated capital gains every 21 years and to prevent the trust from holding capital assets indefinitely without incurring tax. The 21-year disposition rule means that the tax triggered under subsection 104(4) of the Income Tax Act can be substantial. A trust freezes the value of the property for 21 years, so that the beneficiaries receive the cottage at the same value they joined the trust. Thus, the beneficiaries inherit the property without triggering a tax bill. Capital gains are deferred until the beneficiaries decide to sell the property or place it in a trust for their children.

According to the CRA, assets held in a trust are considered sold every 21 years, unless they are actually sold or deployed to beneficiaries before the 21-year period expires. For the trust to designate the property as its principal residence, no corporation or partnership could have been advantageously interested in the trust at any time of the year. But what did the CRA have to say when the date of incorporation of a testamentary trust may not coincide with the death of the testator? For example, if the ERP is used by a trust, no beneficiary or particular family member can designate another property as a personal residence at any time during the calendar year in which the exemption is sought. A pension plan must file a T3 return if the plan or trust is taxable, has a taxable capital gain or has disposed of capital assets. Keeping the family cottage in a trust longer creates a tax nightmare. It is a trust. A trust may elect to be a primary trust if it meets all of the following conditions throughout the period following its creation: This is a trust where the interest of each beneficiary can be described at any time by reference to the entities of the trust. An investment fund must also meet one of the three conditions set out in subsection 108(2) of the Act. A public trust is a mutual fund trust whose shares are listed on a specific stock exchange in Canada. The person using the property as a principal residence must be a specific beneficiary of the trust. And either he, his spouse or partner, his ex-spouse or partner, or his child usually have to live in the estate. The 21-year disposition date applies to most trusts (i.e., family trusts and testamentary trusts established for beneficiaries other than spouses or life partners).

However, for other types of trusts, the first accepted sale does not take place 21 years after the trust is established. For example, if the main purpose of the organization is to provide services such as restaurants, leisure or sports facilities to its members, we consider them a trust. In this case, the trust is taxable on its income from assets and on all taxable capital gains from the sale of real estate not used to provide these services. The trust is allowed to make a deduction of $2,000 when calculating its taxable income. Ask for it on line 54 of the T3 return. Pursuant to paragraph 150(1)(c) of the Income Tax Act, a T3 trust income tax and information return is due within 90 days after the end of the escrow year. A testamentary trust must have a taxation year that must coincide with the calendar year. This data reflects presumed disposition data that would otherwise occur upon the death of the taxpayer (or later the taxpayer or his or her spouse in the case of a spousal trust). .