Income Tax Act

Marginal note:Tax payable by trust

• 122 (1) Notwithstanding section 117, the tax payable under this Part for a taxation year by a trust (other than a graduated rate estate or qualified disability trust) is the total of

  • (a) the highest individual percentage for the taxation year multiplied by the trust’s amount taxable for the taxation year,

  • (b) if the trust is a SIFT trust for the taxation year, the positive or negative amount determined by the formula

    A × B

    where

    A

    is the positive or negative decimal fraction determined by the formula

    C + D - E

    where

    C

    is the net corporate income tax rate in respect of the SIFT trust for the taxation year,

    D

    is the provincial SIFT tax rate of the SIFT trust for the taxation year, and

    E

    is the decimal fraction equivalent of the percentage rate of tax provided in paragraph (a) for the taxation year, and

    B

    is the SIFT trust’s taxable SIFT trust distributions for the taxation year, and

  • (c) if subsection (2) applies to the trust for the taxation year, the amount determined by the formula

    A – B

    where

    A

    is the amount that would be determined for B for the year if

    • (i) the rate of tax payable under this Part by the trust for each taxation year referred to in the description of B were the highest individual percentage for the taxation year, and

    • (ii) the trust’s taxable income for a particular taxation year referred to in the description of B were reduced by the total of

      • (A) the amount, if any, that was paid or distributed in satisfaction of all or part of an individual’s interest as a beneficiary under the trust if

        • (I) the individual was an electing beneficiary of the trust for the particular year,

        • (II) the payment or distribution can reasonably be considered to be made out of that taxable income, and

        • (III) the payment or distribution was made in a taxation year referred to in the description of B,

      • (B) the amount that is the portion of the tax payable under this Part by the trust for the particular year that can reasonably be considered to relate to the amount determined under clause (A), and

      • (C) the amount that is the portion of the tax payable, under the law of the province in which the trust is resident for the particular year, that can reasonably be considered to relate to the amount determined under clause (A), and

    B

    is the total of all amounts each of which is the amount of tax payable under this Part by the trust for a taxation year that precedes the year if that preceding taxation year is

    • (i) the later of

      • (A) the first taxation year for which the trust was a qualified disability trust, and

      • (B) the last taxation year, if any, for which subsection (2) applied to the trust, or

    • (ii) a taxation year that ends after the taxation year described in subparagraph (i).

• Marginal note:Credits available to trusts

  (1.1) No deduction may be made under this subdivision (other than section 118.1, 120.2 or 121) in computing the tax payable by a trust for a taxation year.

• Marginal note:Qualified disability trust — application of (1)(c)

  (2) This subsection applies to a trust for a particular taxation year if the trust was a qualified disability trust for a preceding taxation year and

  • (a) none of the beneficiaries under the trust at the end of the particular year was an electing beneficiary of the trust for a preceding year;

  • (b) the particular year ended immediately before the trust ceased to be resident in Canada; or

  • (c) an amount is paid or distributed in the particular year to a beneficiary under the trust in satisfaction of all or part of the beneficiary’s interest in the trust unless

    • (i) the beneficiary is an electing beneficiary of the trust for the particular year or a preceding year,

    • (ii) the amount is deducted under paragraph 104(6)(b) in computing the trust’s income for the particular year, or

    • (iii) the amount is paid or distributed in satisfaction of a right to enforce payment of an amount that was deducted under paragraph 104(6)(b) in computing the trust’s income for a preceding year.

• Marginal note:Definitions

  (3) The following definitions apply in this section.

  beneficiary

  beneficiary, under a trust, includes a person beneficially interested in the trust. (bénéficiaire)

  electing beneficiary

  electing beneficiary, for a taxation year of a qualified disability trust, means a beneficiary under the trust that for the year

  • (a) makes an election described in clause (a)(iii)(A) of the definition qualified disability trust in this subsection; and

  • (b) is described in paragraph (b) of that definition. (bénéficiaire optant)

  non-deductible distributions amount

  non-deductible distributions amount for a taxation year has the meaning assigned by subsection 104(16). (montant de distribution non déductible)

  qualified disability trust

  qualified disability trust, for a taxation year (in this definition referred to as the “trust year”), means a trust, if

  • (a) the trust

    • (i) is, at the end of the trust year, a testamentary trust that arose on and as a consequence of a particular individual’s death,

    • (ii) is resident in Canada for the trust year, and

    • (iii) includes in its return of income under this Part for the trust year

      • (A) an election, made jointly with one or more beneficiaries under the trust in prescribed form, to be a qualified disability trust for the trust year, and

      • (B) the Social Insurance Number of each of those beneficiaries;

  • (b) each of those beneficiaries is an individual, named as a beneficiary by the particular individual in the instrument under which the trust was created,

    • (i) in respect of whom paragraphs 118.3(1)(a) to (b) apply for the individual’s taxation year (in this definition referred to as the “beneficiary year”) in which the trust year ends, and

    • (ii) who does not jointly elect with any other trust, for a taxation year of the other trust that ends in the beneficiary year, to be a qualified disability trust; and

  • (c) subsection (2) does not apply to the trust for the trust year. (fiducie admissible pour personne handicapée)

  taxable SIFT trust distributions

  taxable SIFT trust distributions, of a SIFT trust for a taxation year, means the lesser of

  • (a) its amount taxable for the taxation year, and

  • (b) the amount determined by the formula

    A/(1 - (B + C))

    where

    A

    is its non-deductible distributions amount for the taxation year,

    B

    is the net corporate income tax rate in respect of the SIFT trust for the taxation year, and

    C

    is the provincial SIFT tax rate of the SIFT trust for the taxation year. (montant de distribution imposable)