I’m preparing the final T3 return for a Joint Partner Trust (JPT) and the final T1 return for the last surviving beneficiary (Dad). Their son is the trustee and sole beneficiary of the estate. There are three properties:
A – Cottage used for personal purposes (Son on title, holding in trust for JPT)
B – Rental property (Dad on title, holding in trust for JPT)
C – Former principal residence, converted to rental in 2022 (Son on title, holding in trust for JPT)
The JPT was reporting all rental income and distributing net income to Dad.
For properties A and B, I’m treating them as deemed disposed by the JPT on Dad’s death and allocating the capital gains to Dad under 104(13.1) for inclusion in his final return.
My question is about property C. It was Mom and Dad’s principal residence until 2022. After Mom passed, Dad moved in with his son and began renting the property. He filed a 45(2) election to preserve principal residence status. Title was transferred to the son, holding it in trust for the JPT.
So, who reports the deemed disposition and claims the principal residence exemption? The trust technically held beneficial ownership, and reported rental income. But the 45(2) election was filed personally by Dad. If I report the gain and T1079 on the T3 return, CRA might ask why the trust is claiming the exemption for a property where the 45(2) election was filed by Dad. But if I report the gain on Dad’s T1, CRA might ask why the trust didn’t report it, since it was claiming rental income.
Curious how others have handled this situation. Appreciate any thoughts.