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Allocation of Trust Income to Beneficiaries - Something to Add to Your Year-End Checklist

December-14-2010

Area Personal Tax & Estates

Summary

Under the Income Tax Act (Canada) (the “Act”), a Canadian resident trust is taxable on its worldwide income earned in the year.  However, the Act permits a trust to take a deduction for amounts paid or payable in the year to a beneficiary, who then must include such amounts in his or her income.  With the increase in Canada Revenue Agency (“CRA”) audit activity surrounding the creation and administration of Canadian trusts, it is important for trustees to bear this in mind, especially as we near the end of the year.

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