CH 8 - Taxation Aspects of Personal Trusts Flashcards

1
Q

In determining the residency of the trust, the courts often consider these factors: (4)

A
  • residence of the majority of the trustees;
  • property location;
  • residence(s) of the beneficiaries;
  • residence of the settlor.
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2
Q

3 types of testamentary trusts

A

1- Graduated Rate Estate (GRE) (estate trust
2. Qualified Disability Trust (QDT)
3. Other Testamentary Trust

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3
Q

Uses of Inter Vivos
Trusts (3)

A

Provide for incapable individuals.
Provide creditor-proofing and reduce probate fees.
Split income with family members.

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4
Q

Tax treatment of revocable trust

A

income and capital gains derived on the trust property are attributed back to the settlor

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5
Q

21 year deemed disposition rule does not apply to

A

spousal trusts

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6
Q

The Income Tax Act defines a “preferred beneficiary” as a beneficiary who is a resident in Canada, mentally or physically impaired, entitled to the disability tax credit, and one of the following: (3)

A
  • the settlor, spouse or former spouse (including a common-law spouse);
  • the child, grandchild or great-grandchild of the settlor;
  • the spouse of the child, grandchild or great-grandchild of the settlor.
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7
Q

The preferred beneficiary election may be useful for physically or mentally impaired beneficiaries who have one or more of the following characteristics: (3)

A
  • low or zero marginal tax rate
  • no immediate need for income
  • asset management skills that are inferior to those possessed by the trustee
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8
Q

trust income that has not been paid to a minor beneficiary in the year is deemed payable to the minor if: (4)

A
  • the trust is a resident in Canada throughout the year;
  • the beneficiary is under 21 years of age at the end of the year;
  • the beneficiary’s right to income is vested before the end of the year and did not become vested due to the
    exercise or non-exercise of a discretionary power;
  • is not subject to any future condition other than the condition that the beneficiary survives to an age of not more than 40 years
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9
Q

is a trust a legal entity?

A

NO

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10
Q

Is at rust required to file separate tax returns?

A

YES

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