Who Pays Tax on Income From a Bare Trust in Canada?

If property is held in your name for someone else, or someone else holds property for you, a practical question follows: who reports the rent, interest or gain on a tax return? Getting this wrong can mean income is missed or reported twice.

For a reportable bare trust, the Canada Revenue Agency (CRA) says the income from the trust property should be reported on the beneficial owner's tax return. This article explains it in plain terms, along with the related reporting rules and the points that still depend on your facts.

This article covers Canadian federal tax law, which applies in every province.

The short answer: the beneficial owner reports

For a reportable bare trust, the CRA says all income, capital gains and capital losses from the trust property should be reported on the beneficial owner's tax return. The trustee does not report them on the trust's T3.

This follows from how a bare trust works. The trustee generally has no significant powers, cannot act without the beneficiary's instructions, and only holds legal title. The beneficiary is the beneficial owner and the trustee is the legal owner. The CRA treats the trustee as acting as agent for all beneficiaries, and such an arrangement is generally treated as not being a trust for the purposes of the Income Tax Act, with some exceptions.

In everyday terms, the person whose property it really is, and who gets the benefit of it, is the one who reports the income. The name on title does not move the tax to the trustee.

How this applies to rent, interest and gains

The CRA's statement covers income, capital gains and capital losses from the trust property. That means rent from a property held by a bare trustee, interest from a bare-trust account and a gain or loss on a sale are, as a starting point, reported by the beneficial owner and not the trustee.

Joint accounts are a separate situation. For a joint bank account, CRA guidance says you generally report your share of interest based on how much you contributed. If the account is truly joint, the bare trust question may not even arise, because the deemed-trust rule does not apply where every beneficiary is also a legal owner and no legal owner is a non-beneficiary.

Principal residences deserve a note. Ownership for the principal residence exemption includes being a beneficial owner of the property, alone or jointly with another person, so the beneficial owner behind a bare trust can look to the exemption. If a trust itself were to designate a property as its principal residence, no corporation (other than a registered charity) or partnership can have been beneficially interested in the trust. Other conditions of the exemption still apply and should be checked.

The details of a particular sale, such as which costs count and how the transfer into the arrangement was treated, depend on the facts and the documents. Have an accountant confirm them before you file.

Bare trusts compared with regular trusts

Resident express trusts that are not listed trusts must file a T3. A bare trust is not taxed as a separate taxpayer in the same way, even when a reporting form is required.

Reporting forms: separate from who pays the tax

Who reports the income is one question. Whether a bare trust must file an information return is another. For taxation years ending in 2025, the CRA does not expect bare trusts to file a T3 return, including Schedule 15. Reportable bare trusts are subject to the trust reporting rules for taxation years ending on or after December 31, 2026, with first returns due 90 days after year-end, which is March 31, 2027 for a December 31, 2026 year-end.

• On a T3 filed for a reportable bare trust, only the fields marked with a check mark need completing, and the other parts can be left blank.
• If the trust has no governing document name, the CRA says to list the beneficial owner's legal name followed by the word Trust.
• A late-filing penalty where no tax is unpaid is $25 a day, with a minimum of $100 and a maximum of $2,500, and a bare trust usually has no tax payable.
• A reportable bare trust that is also a listed trust is not required to file unless it is requested to file.

Filing a T3 for a reportable bare trust does not change the CRA's position that the income belongs on the beneficial owner's return.

What to do next

The steps below help you sort out who reports what before you file. How this applies to your property depends on your situation, so it is worth confirming with a lawyer or accountant.

• Identify who is the legal owner and who is the beneficial owner, and why.
• Gather statements showing rent, interest or other income earned on the property.
• Confirm that the beneficial owner has reported the income on their own return.
• Check whether the arrangement is reportable for the 2026 year.
• Ask an accountant or lawyer to confirm whether a bare trust exists, since the CRA says it is a question of fact.

Frequently asked questions