For taxation years beginning in 2023, bare trusts are required
to file a T3 Trust Income Tax and Information Return. The return
requires detailed information about the trustee and the
beneficiaries. Failure to comply with this filing requirement can
result in significant penalties.
Bare trusts are commonly used in the real estate industry. The
land titles systems in most Canadian jurisdictions have an
idiosyncrasy that drives real estate developers and other
businesses in the real estate sector to use bare trusts.
Specifically, land titles legislation and registration procedures
do not recognize the existence of partnerships. However, limited
partnerships are a popular form of a business organization in real
estate, owing to tax efficiencies as well as other legal and
commercial reasons. The Land Titles Act in
Alberta, for example, does not permit partnerships to be registered
on title. The solution is to use a bare trust, where a legal person
– typically, the
