In 2015, my mother added my sister and me to the title of her primary residence in Canada as joint tenants. I am the only dual USC/Can here; everyone else is Canadian. I reside in this same house with my senior parents; my sister has her own residence.
We are in the process of trying to figure out if this arrangement is a bare trust as there are new reporting requirements from CRA that include disclosing bare trusts in a T3 return/Schedule 15 for the first time for 2023. It's not clear yet if this is a bare trust as there are limited facts to test, but I'm in the process of reaching out to CRA; local tax preparer and local lawyer to try and parse it--so far the first CRA agent I've spoken to has suggested requesting a technical ruling from CRA. So TBD.
US side: If our addition to the title of the property in 2015 is considered a gift of beneficial ownership, the 1/3 value of the house was less than the $100K US required for for reporting gifts to IRS on 3520, so think I'm okay there.
BUT if we do end up declaring it as a bare trust to CRA via T3/Schedule 15 with my sister and I as trustees and my mother (and maybe my father) as beneficial owners, does that mean I have any kind of trust reporting on the US side of things? I have taken a look at the form 3520 instructions, but haven't been able to figure it out.
Joint Tenants, Bare Trust: any US Trust reporting?
Moderator: Mark T Serbinski CA CPA
Re: Joint Tenants, Bare Trust: any US Trust reporting?
I'm no expert on any of this and also struggling to understand the new Trust reporting rules.
The new reporting requirements are causing a lot of confusion, and a lot of extra work for many. I have had a similar exchange with a CRA Agent, ie. request a technical ruling. That just tells me even CRA doesn't understand how to apply these new trust rules.
There is some good information on the TaxTips.ca website you might find helpful. This link
https://www.taxtips.ca/willsandestates/ ... ership.htm
talks about Bare Trusts, Joint ownership and Beneficial vs legal ownership.
According to that, you would have a bare trust, unless beneficial ownership was transferred.
If you and your sister are the only beneficiaries of your mother's estate you might be able to say beneficial ownership was transferred, since there are no other heirs to lay a claim. But, transferring beneficial ownership might create other problems you don't want. Like, if the property is sold at some point in time, your sister might have pay capital gains tax in Canada on her 33% ownership, since it is not her primary residence. And you might have capital gains to report to the US, depending on the value of the property. If beneficial ownership was not transferred then it seems your sister, and maybe you too, would be the trustee that has to file the the new T3 return, and possibly the Underused Housing Tax return as well. (you can search the UHT on the tax tips website too for more information on it)
I can't comment on the US side trust reporting.
The new reporting requirements are causing a lot of confusion, and a lot of extra work for many. I have had a similar exchange with a CRA Agent, ie. request a technical ruling. That just tells me even CRA doesn't understand how to apply these new trust rules.
There is some good information on the TaxTips.ca website you might find helpful. This link
https://www.taxtips.ca/willsandestates/ ... ership.htm
talks about Bare Trusts, Joint ownership and Beneficial vs legal ownership.
According to that, you would have a bare trust, unless beneficial ownership was transferred.
If you and your sister are the only beneficiaries of your mother's estate you might be able to say beneficial ownership was transferred, since there are no other heirs to lay a claim. But, transferring beneficial ownership might create other problems you don't want. Like, if the property is sold at some point in time, your sister might have pay capital gains tax in Canada on her 33% ownership, since it is not her primary residence. And you might have capital gains to report to the US, depending on the value of the property. If beneficial ownership was not transferred then it seems your sister, and maybe you too, would be the trustee that has to file the the new T3 return, and possibly the Underused Housing Tax return as well. (you can search the UHT on the tax tips website too for more information on it)
I can't comment on the US side trust reporting.
Re: Joint Tenants, Bare Trust: any US Trust reporting?
Thanks, I think we've got some time to figure out if Can reporting is required since CRA has signalled that they will waive penalties for bare trusts while people are trying to figure it out. And I think we'll need that time to get some opinions. If we need to do it, there are instructions on the CRA website for T3 & Schedule 15.
On the US side, I was reading an article from RBC that said:
"The U.S. foreign trust rules will only apply to a foreign trust if that trust is recognized as a trust for U.S. tax purposes. For U.S. tax purposes,
a trust is generally defined as an arrangement created by a Will or inter vivos declaration by which title to property is held by a person (or
persons), referred to as the “trustee,” with a fiduciary responsibility to conserve or protect the property for the benefit of another person (or persons), called the “beneficiary.”An arrangement or relationship that qualifies as a trust under the tax laws of a foreign country may not necessarily be classified as a trust under U.S. tax laws and would not be subject to the foreign trust rules."
Does anyone know if a bare trust is considered a US foreign trust by IRS?
On the US side, I was reading an article from RBC that said:
"The U.S. foreign trust rules will only apply to a foreign trust if that trust is recognized as a trust for U.S. tax purposes. For U.S. tax purposes,
a trust is generally defined as an arrangement created by a Will or inter vivos declaration by which title to property is held by a person (or
persons), referred to as the “trustee,” with a fiduciary responsibility to conserve or protect the property for the benefit of another person (or persons), called the “beneficiary.”An arrangement or relationship that qualifies as a trust under the tax laws of a foreign country may not necessarily be classified as a trust under U.S. tax laws and would not be subject to the foreign trust rules."
Does anyone know if a bare trust is considered a US foreign trust by IRS?
Re: Joint Tenants, Bare Trust: any US Trust reporting?
The Joint ownership you describe is not considered a trust in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Re: Joint Tenants, Bare Trust: any US Trust reporting?
Thank you! I had horrible visions of 3520 filings; I will sleep better now.