This online course has been designed as an overview of the income tax implications of estates and trusts. It is limited to personal trusts and federal income tax. As the topic intertwines both trust law and tax law, the issues can be very complex. Estates and Trusts will enable you to become familiar with basic trust law concepts, to handle estate administration, and to prepare trust returns making the optimal decisions regarding income tax elections and computation of tax payable.

As the subject matter involves a substantial amount of trust law not covered in this course, it is imperative that legal advice be sought whenever deemed prudent.

Most of the material covered in the course is contained in Subdivision k (sections 104–108) of the Income Tax Act. You should be familiar with the taxation of deceased persons in order to understand which items are taxed upon death and which are taxable in an estate or trust. While in some instances there are direct quotes from the Act, in general, the Act is paraphrased throughout the course. Direct quotes are in italics.

This course is based on the Income Tax Act as it stood at February 4, 2011 and includes any measures proposed by the March 22, 2011 and June 6, 2011 federal budgets. References may be made to proposed amendments when appropriate.

This course is divided into 8 modules. There are two online quizzes — one following Module 4 and one following Module 8 — which have been designed to test your understanding of the concepts covered in this course. Some of the more important Interpretation Bulletins (ITs), as well as selected prescribed forms, have been reproduced as appendices or provided as Web links. IT/IC/forms which have not been provided can be accessed through CRA’s website at www.ccra-adrc.gc.ca.

There are occasional comments and references to CRA Technical interpretations. These documents are not available on CRA’s website. They are accessible by a tax service/reporter.

You are expected to have a current Income Tax Act or to have access to an up-to-date tax service/reporter.

Module 1 Trusts and estates — Legal and accounting aspects
Trusts
Estates
Estate or trust accounting
Example of accounts of an estate

Module 2 Trusts under the Income Tax Act
Definition of trust
Types of trust under the Income Tax Act
Taxation of a trust

Module 3 Considerations when setting up a trust
Disposition of property to a trust
Attribution rules
21-year deemed realization

Module 4 Computation of a trust’s income before allocations
Taxable capital gains/allowable capital losses
Pension income
Investment income
Business income
Other income
Deductions

Quiz 1

Module 5 Allocation of income to beneficiaries
Overview
Income payable
Taxation of beneficiaries
Taxable benefits

Module 6 Taxable income and income taxes payable
Taxable income
Taxes payable
Non-resident beneficiaries

Module 7 Income and capital interest in a trust
Income interest
Capital interest
Clearance certificates

Module 8 Family trusts and GST issues
Family trusts
Henson trusts
Management trusts
Goods and services tax

Quiz 2

Summary

Appendices
Appendix A — Website references
Appendix B — Checklist of duties of legal representatives
Appendix C — Sample completed T3 return, schedules, and supplementary
Appendix D — Sample completed T3 return, schedules, and supplementary
Appendix E — Draft statement — Regulation 2800(1)

Adam Plank, CGA, is the head of EPR Coquitlam’s Tax Practice which focuses exclusively on delivering value to privately held businesses.  For over 10 years, many with a national firm, Adam has worked solely with private corporations and their shareholders advising them on a broad range of taxation and business matters including corporate reorganizations, business and financing structures, estate, trust and will planning, business successions and divestitures and employee/shareholder compensation arrangements.