Bare Trust Reporting For Nominee And LP Real Estate Structures

After three years of administrative deferrals, the enhanced trust reporting rules are now in effect. While many family arrangements may benefit from simplified exceptions, commercial real estate structures, including single-purpose nominee corporations, co-tenancy joint ventures, and general partners holding title for limited partnerships (LPs), frequently fall within the expanded reporting net. Many common arrangements in the GTA market will face their first filing deadline on March 31, 2027, for the 2026 taxation year.

Where the Rules Stand

The expanded reporting framework was originally enacted in 2022. However, following unintended impacts on taxpayers, the CRA issued consecutive exemptions, confirming it does not expect bare trusts to file a T3 Trust Income Tax and Information Return (T3 Return) or Schedule 15 for the 2023, 2024, or 2025 taxation years.

Legal clarity arrived with Bill C-15, the Budget Implementation Act, 2025, No. 1, which received Royal Assent in March 2026. This legislation repealed the previous bare trust reporting provisions and replaced them with a revised deeming rule under subsection 150(1.3) and a specific set of relief provisions under subsection 150(1.31), applicable to taxation years ending on or after December 31, 2026.

The Deeming Rule: Subsection 150(1.3)

The term "bare trust" remains absent from the Income Tax Act. Instead, subsection 150(1.3) deems a trust to exist for reporting purposes (and section 204.2 of the Income Tax Regulations) where:

1. An express trust exists where one or more "legal owners" hold property for the use or benefit of one or more persons or partnerships; and
2. The legal owner can reasonably be considered to act as an agent for those persons or partnerships.

Under this framework, each legal owner is deemed a trustee, and each person or partnership with the use or benefit of the property is deemed a beneficiary. Crucially, subsection 150(1.3)(c) establishes that a partnership is a beneficiary in its own right.

The Partnership Property Exception: Subsection 150(1.31)(d)

For commercial structures, the primary relief is found in paragraph 150(1.31)(d). The deeming rule is "switched off" if three cumulative conditions are met:

1. Exclusivity: The property is held throughout the year and solely for the use or benefit of a partnership.
2. Status: Each legal owner of the property is a partner of that partnership.
3. Visibility: A member of the partnership is required (or would be but for administrative thresholds in subsection 220(2.1)) to file a T5013 Partnership Information Return under section 229 of the Income Tax Regulations for the fiscal period including December 31.

The visibility condition effectively leverages the fact that the partnership is already "visible" to the CRA via its own filing obligations.

Value-Based Exemptions Under Subsection 150(1.2)

Most real estate structures fail the "listed trust" exceptions due to the high value of assets:

• Paragraph 150(1.2)(b): Exempts trusts holding assets with a total fair market value (FMV) not exceeding $50,000 throughout the year. For years ending on or after December 31, 2024, this threshold no longer restricts the types of assets held, though real property almost always exceeds this limit.
• Paragraph 150(1.2)(b.1): Provides a $250,000 threshold, but only if every trustee is an individual and every beneficiary is a related individual. Furthermore, real property is generally excluded from the set list of permitted assets for this threshold, which focuses on money, GICs, and listed securities.

Penalties for Non-Compliance

1. Late-Filing (Subsection 162(7)): If a return is filed late and no tax is payable, the penalty is $25 per day, with a $100 minimum and a $2,500 maximum.
2. Gross Negligence (Subsection 163(5)): For non-listed trusts, if the failure to file or a false statement is made knowingly or with gross negligence, the penalty is the greater of $2,500 and 5% of the highest total FMV of all property held by the trust at any time in the year. For an arrangement holding a $10 million property, this penalty would be $500,000.

How Common Structures Land for 2026