Income Tax Act

Marginal note:Tax payable by inter vivos trust

• 122 (1) Notwithstanding section 117, the tax payable under this Part for a taxation year by an inter vivos trust is the total of

  • (a) 29% of its amount taxable for the taxation year, and

  • (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.

• Marginal note:Deductions not permitted

  (1.1) No deduction may be made under section 118 in computing the tax payable by a trust for a taxation year.

• Marginal note:Where subsection (1) does not apply

  (2) Subsection (1) does not apply for a taxation year of an inter vivos trust that is not a mutual fund trust and that

  • (a) was established before June 18, 1971;

  • (b) was resident in Canada on June 18, 1971 and without interruption thereafter until the end of the year;

  • (c) did not carry on any active business in the year;

  • (d) has not received any property by way of gift since June 18, 1971;

  • (d.1) was not a trust to which a contribution (as defined by section 94 as it reads for taxation years that end after 2006) was made after June 22, 2000;

  • (e) has not, after June 18, 1971, incurred

    • (i) any debt, or

    • (ii) any other obligation to pay an amount,

    to or guaranteed by, any person with whom any beneficiary of the trust was not dealing at arm’s length; and

  • (f) has not received any property after December 17, 1999, where

    • (i) the property was received as a result of a transfer from another trust,

    • (ii) subsection (1) applied to a taxation year of the other trust that began before the property was so received, and

    • (iii) no change in the beneficial ownership of the property resulted from the transfer.

• Marginal note:Definitions

  (3) The following definitions apply in this section.

  non-deductible distributions amount

  montant de distribution non déductible

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

  taxable SIFT trust distributions

  montant de distribution imposable

  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.