Business structure

There are several business structures:

• Sole proprietorship
• Partnership
• Corporation
• Registered charity
• Non-profit organizations
• Trusts

Sole proprietorship

A sole proprietorship is an unincorporated business entirely owned and managed by only one individual.

A sole proprietor is fully responsible for all debts and obligations related to the business.

A creditor with a claim against a sole proprietor would normally have a right against all business and personal assets. The creditor could seize business or personal assets. This is known as unlimited liability.

Characteristics of a sole proprietorship:

• business is not incorporated
• owner has sole responsibility for decision making
• owner receives all profits and takes full responsibility for all losses
• owner is considered self-employed and reports the business income on a T1 Individual Income Tax Return

Forms and publications

• Guide T4002, Business and Professional Income
• Booklet RC2, The Business Number and Your Canada Revenue Agency Program Accounts
• Form RC1, Request for a Business Number (BN)

Partnership

The partnership itself is the business that receives a business number (BN), not each partner.

A partnership exists when each partner shares the management of the business and has personal liability for the business debts and obligations.

The characteristics of a partnership are:

• association between two or more persons
• each partner is co-owner of the business and is responsible for the actions of the other partners
• each partner contributes money, property and/or skills
• each partner is entitled to a share of the profit/losses based on the partnership agreement
• each partner is considered self-employed and reports their share of income/loss on a T1 Individual Tax and Benefit Return

What is the difference between a partnership and a joint venture?

A joint venture is not considered a "person" for registration purposes, whereas a partnership is. Therefore, a partnership can have a BN; a joint venture cannot. A joint venture is limited in scope; a partnership is generally an ongoing business relationship that exists between persons carrying on common business.

Forms and publications

• Guide T4002, Business and Professional Income
• Guide T4012, T2 Corporation - Income Tax Guide
• Booklet RC2, The Business Number and Your Canada Revenue Agency Program Accounts
• Form RC1, Request for a Business Number (BN)

Corporation

A corporation is owned by shareholders. No shareholder of a corporation is personally liable for the debts, obligations or acts of the corporation. However, directors could be held personally liable for the debts of the corporation.

A corporation can incorporate at either the federal, provincial, or territorial level.

A corporation is identified by the terms "Limited," "Ltd.," "Incorporated," "Inc.," "Corporation," or "Corp.". Whatever the term, it must appear with the corporation name on all documents, stationery, and so on, as it appears on the incorporation document.

Characteristics of a corporation:

• it is its own legal entity
• businesses of all sizes can be corporations
• shareholders cannot claim any loss the corporation sustains
• shares can be bought and sold without affecting the existence of the corporation
• it must file a T2 Corporate Income Tax Return

If you want to incorporate your business, depending on whether you want to incorporate provincially, territorially, or federally, you should contact your provincial/territorial incorporating authority or Industry Canada.

Forms and publications

• Guide T4012, T2 Corporation - Income Tax Guide
• Booklet RC2, The Business Number and Your Canada Revenue Agency Program Accounts
• Form RC1, Request for a Business Number (BN)

Registered charity

A registered charity is an organization established and operated for charitable purposes, and must devote its resources to charitable activities. The charity must be resident in Canada, and cannot use its income to benefit its members.

A charity also has to meet a public benefit test. To qualify under this test, an organization must show that:

• its activities and purposes provide a tangible benefit to the public
• those people who are eligible for benefits are either the public as a whole, or a significant section of it, in that they are not a restricted group or one where members share a private connection, such as social clubs or professional associations with specific membership
• the charity's activities must be legal and must not be contrary to public policy

To register as a charity, the organization has to be either incorporated or governed by a legal document called a trust or a constitution. This document has to explain the organization's purposes and structure.

For more information, see Charities and Giving.

Forms and publications

• Guide T4063, Registering a Charity for Income Tax Purposes
• Booklet RC2, The Business Number and Your Canada Revenue Agency Program Accounts
• Form RC1, Request for a Business Number (BN)
• Form T2050, Application to Register a Charity Under the Income Tax Act

Non-profit organizations

A non-profit organization (NPO) is a club, society, or association that's organized and operated solely for:

• social welfare
• civic improvement
• pleasure or recreation
• any other purpose except profit.

Forms and Publications

• Guide T4117, Income Tax Guide to the Non-Profit Organization (NPO) Information Return
• Pamphlet RC2, The Business Number and Your Canada Revenue Agency Program Accounts
• Form T1044, Non-Profit Organization (NPO) Information Return
• Form RC1, Request for a Business Number (BN)
• IT496R, Non-Profit Organizations

A trust is either a testamentary trust or an inter vivos trust. You need to know the type of trust, since different tax rules apply to different trusts.

The following are different types of inter vivos trusts:

• Alter ego trust
• Communal organization
• Deemed resident trust
• Employee benefit plan
• Employee life and health trust (ELHT)
  Employee trust
  Environmental Quality Act trust
  Health & Welfare Trust (HWT)
• Insurance segregated fund trust
• Joint spousal or common-law partner trust
• Master trust
• Mutual fund trust
• Non-profit organization
  Nuclear Fuel Waste Act trust
• Personal trust
  Pooled Registered Pension Plans
• Qualifying environmental trust (QET)
  Real estate investment trust (REIT)
• Registered disability savings plan (RDSP) trust
  Registered education savings plan (RESP) trust
• Registered retirement income fund (RRIF) trust
• Registered retirement savings plan (RRSP) trust
• Retirement compensation arrangement (RCA)
• Salary deferral arrangement
• Specified investment flow-through (SIFT) trust
• Specified trust
• Spousal or common-law partner trust
• Tax-free savings account (TFSA) trust
• Unit trust

Testamentary trust

A testamentary trust is a trust or estate that is generally created on the day a person dies. All testamentary trusts are personal trusts. The terms of the trust are established by the will or by court order in relation to the deceased individual's estate under provincial or territorial law.

Generally, this type of trust does not include a trust created by a person other than a deceased individual, or a trust created after November 12, 1981, if any property was contributed to it other than by a deceased individual as a consequence of the individual's death. Contact us for rules about testamentary trusts created before November 13, 1981.

If the assets are not distributed to the beneficiaries according to the terms of the will, the testamentary trust may become an inter vivos trust.

Under proposed changes, for tax years ending after December 20, 2002, a testamentary trust may become an inter vivos trust if the trust incurs a debt or other obligation to pay an amount to, or guaranteed by, a beneficiary. For this purpose, a beneficiary includes a person or partnership with whom any beneficiary of the trust does not deal at arm's length.

This does not apply for certain debts or other obligations, including ones:

• incurred by the trust in satisfaction of a beneficiary's right to enforce payment of an amount payable by the trust to the beneficiary or to receive any part of the trust's capital;
• owed to the beneficiary as a result of services provided by the beneficiary for the trust; or
• owed to the beneficiary as a result of a payment on behalf of the trust for which property was transferred to the beneficiary within 12 months of the payment and the beneficiary would have made the payment had they been dealing with the trust at arm's length.

Inter vivos trust

An inter vivos trust is a trust that is not a testamentary trust.

Grandfathered inter vivos trust

A grandfathered inter vivos trust is one established before June 18, 1971, which:

• was resident in Canada without interruption from June 18, 1971, until the end of the tax year;
• did not carry on any active business in the tax year;
• did not receive any property as a gift since June 18, 1971;
• did not incur any debt or obligation after June 18, 1971, to pay an amount to, or guaranteed by, any person with whom any beneficiary of the trust was not dealing at arm's length;
• did not receive any property after December 17, 1999, as a transfer from another inter vivos trust, where:
  • the other trust is not grandfathered; and
  • there is no change in the beneficial ownership of the property on its transfer; and
• for tax years beginning after 2002, was not a trust that received a contribution of property after June 22, 2000.

Note

When a trust has elected to be treated as a deemed resident trust for 2001 or 2002, the last condition will apply to the determination of the status of the trust as a grandfathered inter vivos trust for those tax years as well. Attach a letter to the T3 return asking to have section 94 of the Income Tax Act apply for those years. Contact us for the date by which this election must be received.

Alter ego trust

This is an inter vivos trust created after 1999 by a settlor who was 65 years of age or older at the time the trust was created, for which the settlor is entitled to receive all the income that may arise during his or her lifetime, and is the only person who can receive, or get the use of, any income or capital of the trust during the settlor's lifetime. A trust will not be considered an alter ego trust if it so elects in its return for its first tax year.

Communal organization

We consider an inter vivos trust to exist when a congregation:

• has members who live and work together;
• follows the practices and beliefs of, and operates according to the principles of, the religious organization of which it is a part;
• does not permit its members to own property in their own right;
• requires that its members devote their working lives to the congregation's activities; and
• carries on one or more businesses directly, or owns all of the shares of the capital stock of a corporation (except directors' qualifying shares), or every interest in a trust or other person that carries on the business to support or sustain its members or the members of another congregation.

The communal organization has to pay tax as though it were an inter vivos trust. However, it can elect to allocate its income to the beneficiaries. For more information, see Information Circular IC78-5 Communal Organizations.

Deemed resident trust

This is a trust resident in another country, but that is considered resident in Canada for certain tax purposes. Usually, such a trust has received a contribution from a resident or former resident of Canada. A trust is a deemed resident if:

• a resident of Canada transferred property to the trust and is either beneficially interested in the trust (for example, as a beneficiary of the trust), or is related to such a person (including an aunt, uncle, nephew, or niece of the beneficiary); or
• the beneficiary acquired an interest in the trust by way of purchase or as a gift or inheritance from a Canadian resident who transferred property to the trust.

Under proposed changes, a trust will generally be considered to be a deemed resident if it acquired property from a person who is resident in Canada or if any of the beneficiaries are resident in Canada, and a contribution of property was made by a resident or former resident of Canada. Contact us if you need help in determining whether the trust is a deemed resident of Canada.

Employee benefit plan

Generally, this is any arrangement under which an employer makes contributions to a custodian, and under which one or more payments will be made to, or for the benefit of, employees, former employees, or persons related to them.

For more information, and for details on what we consider to be an employee benefit plan and how it is taxed, see Interpretation Bulletin IT502 – Employee Benefit Plans and Employee Trusts, and its Special Release.

Note

An employee benefit plan has to file a return if the plan or trust has tax payable, has a taxable capital gain, or has disposed of capital property.

Because the allocations are taxed as income from employment to the beneficiaries, report the allocations on a T4 slip, not on a T3 slip. For more information, see Guide RC4120, Employers' Guide - Filing the T4 Slip and Summary.

Employee life and health trust (ELHT)

This is an inter vivos trust, established after 2009 by one or more employers, that meets a number of conditions under subsection 144.1(2) of the Act. The trust's only purpose is the payment of a designated employee benefit (DEBs) for employees and certain related persons (certain limitations apply to the rights and benefits that may be provided to key employees).

Employers can deduct contributions made to the trust, as long as they are for DEBs and meet the conditions in subsection 144.1(4). Employee contributions are permitted, but are not deductible. However, employee contributions may qualify for the medical expense tax credit, to the extent that they are made to a private health services plan.

The trust can deduct amounts paid to employees or former employees for DEBs and can generally carry non-capital losses back or forward three years. Any amount received from an ELHT must be included in income, unless the amount was received as the payment of a DEB. Payments of DEBs to non-resident employees or former employees will generally not be subject to tax under Part XIII.

For more information on ELHT's, designated employee benefits, and key employees, see subsection 144.1 of the Act.

Employee trust

This is an inter vivos trust. Generally, it is an arrangement established after 1979, under which an employer makes payments to a trustee in trust for the sole benefit of the employees. The trustee has to elect to qualify the arrangement as an employee trust on the trust's first return. The employer can deduct contributions to the plan only if the trust has made this election and filed it no later than 90 days after the end of its first tax year. To maintain its employee trust status, each year the trust has to allocate to its beneficiaries all non-business income for that year, and employer contributions made in the year. Business income cannot be allocated and is taxed in the trust.

For more information, see Interpretation Bulletin IT502 – Employee Benefit Plans and Employee Trusts, and its Special Release.

Note

An employee trust has to file a return if the plan or trust has tax payable, has a taxable capital gain, or has disposed of capital property.

Because the allocations are taxed as income from employment to the beneficiaries, report the allocations on a T4 slip, not a T3 slip. For more information, see Guide RC4120, Employers' Guide - Filing the T4 Slip and Summary.

Environmental Quality Act trust

A trust under paragraph 149(1)(z.1) of the Act. This is a trust that was created because of a requirement imposed by section 56 of the Environment Quality Act. The trust must meet the following conditions:

• the trust is resident in Canada; and
• the only persons that are beneficially interested are;
  1. Her Majesty in right of Canada,
  2. Her Majesty in right of a province, or
  3. a municipality (as defined in section 1 of the Act) that is exempt because of this subsection from tax under this Part on all of its taxable income.

Health & Welfare Trust (HWT)

Health and welfare benefits for employees are sometimes provided through a trust arrangement under which the trustees receive the contributions from the employer(s), and in some cases from employees, to provide such health and welfare benefits as have been agreed to between the employer and the employees. To qualify for treatment as a HWT, the funds of the trust cannot revert to the employer or be used for any purpose other than providing health and welfare benefits for which the contributions are made. In addition, the employer's contributions to the fund must not exceed the amounts required to provide these benefits. Further, to qualify for treatment as a HWT, the payments by the employer cannot be made on a voluntary or gratuitous basis - they must be enforceable by the trustees should the employer decide not to make the payments required. This arrangement is restricted to the following:

1. a group sickness or accident insurance plan;
2. a private health services plan;
3. a group term life insurance policy; or
4. any combination of (a) to (c).

For more information, see Interpretation Bulletin IT-85R2 - Health and Welfare trusts for employees.

Insurance segregated fund trust

This is a related segregated fund of a life insurer for life insurance policies and is considered to be an inter vivos trust. The fund's property and income are considered to be the property and income of the trust, with the life insurer as the trustee.

Note

You have to file a separate return and financial statements for each fund. If all the beneficiaries are fully registered plans, complete only the identification and certification areas of the return and enclose the financial statements. If the beneficiaries are both registered and non-registered plans, report and allocate only the income that applies to the non-registered plans.

Joint spousal or common-law partner trust

This is an inter vivos trust created after 1999 by a settlor who was 65 years of age or older at the time the trust was created. The settlor and the settlor's spouse or common-law partner are entitled to receive all the income that may arise from the trust before the later of their deaths. They are the only persons who can receive, or get the use of, any income or capital of the trust before the later of their deaths.

Master trust

This is an inter vivos trust. A trust can elect to be a master trust if during the entire time since its creation it met all of the following conditions:

• it was resident in Canada;
• its only undertaking was the investing of its funds;
• it never borrowed money except for a term of 90 days or less (for this purpose, the borrowing cannot be part of a series of loans or other transactions and repayments);
• it has never accepted deposits; and
• each of its beneficiaries is a registered pension plan or a deferred profit sharing plan.

Note

A master trust is exempt from Part I tax. A trust can elect to be a master trust by indicating this in a letter filed with its return for the tax year the trust elects to become a master trust. Once made, this election cannot be revoked. However, the trust must continue to meet the conditions listed above, to keep its identity as a master trust. After the first T3 return is filed for the master trust, you do not have to file any further T3 returns for this trust. If a future return is filed, we will assume the trust no longer meets the above conditions. The trust will not be considered a master trust and must file yearly returns from then on. If the trust is wound up, send us a letter to tell us the wind-up date.

Mutual fund trust

This is a unit trust that resides in Canada. It also has to comply with the other conditions of the Income Tax Act, as outlined in section 132 and the conditions established by Income Tax Regulation 4801. For a mutual fund trust that is a public trust, or public investment trust, there are certain reporting requirements these types of trusts must meet. For more information, see below or go to Trust administrators.

Public trust

A public trust is, at any time, a mutual fund trust the units of which are listed, at that time, on a designated stock exchange in Canada.

Public investment trust

A public investment trust is, at any time, a trust that is a public trust, where all or substantially all of the fair market value of the property is, at that time, attributable to the fair market value of property of the trust that is:

• units of public trusts;
• partnership interests in public partnerships;
• shares of the capital stock of public corporations; or
• any combination of those properties.

Non-profit organization

This is an organization (for example, club, society, or association) that is usually organized and operated exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit. The organization will generally be exempt from tax if no part of its income is payable to, or available for, the personal benefit of a proprietor, member, or shareholder. For more information, see Interpretation Bulletin IT496 – Non-Profit Organizations.

If the main purpose of the organization is to provide services such as dining, recreational, or sporting facilities to its members, we consider it to be an inter vivos trust. In this case, the trust is taxable on its income from property, and on any taxable capital gains from the disposition of any property that is not used to provide those services. The trust is allowed a deduction of $2,000 when calculating its taxable income. Claim this on line 54 of the T3 return. For more information, see Interpretation Bulletin IT83– Non-profit organizations - Taxation of income from property.

Note

A non-profit organization may have to file Form T1044, Non-Profit Organization (NPO) Information Return. For more information, see Guide T4117, Income Tax Guide to the Non-Profit Organization (NPO) Information Return.

Nuclear Fuel Waste Act trust

A trust under paragraph 149(1)(z.2) of the Act. This is a trust that was created because of a requirement imposed by subsection 9(1) of the Nuclear Fuel Waste Act. The trust must meet the following conditions:

• the trust is resident in Canada; and
• the only persons that are beneficially interested are;
  1. Her Majesty in right of Canada,
  2. Her Majesty in right of a province,
  3. a nuclear energy corporation (as defined in section 2 of the Act) all the shares of the capital stock of which are owned by one or more persons described in clause (A) or (B),
  4. the waste management organization established under section 6 of the Act if all shares of its capital stock are owned by one or more nuclear energy corporations described in clause (C), or
  5. Atomic Energy of Canada Limited, being the company incorporated or acquired in accordance with subsection 10(2) of the Atomic Energy Control Act.

Personal trust

This is either:

• a testamentary trust; or
• an inter vivos trust in which no beneficial interest was acquired for consideration payable either to the trust, or a person who contributed to the trust.

The person or related persons who create an inter vivos trust may acquire all the interests in it without the trust losing its status as a personal trust.

A personal trust does not include a trust that is, or was at any time after 1999, a unit trust.

Pooled Registered Pension Plans

Under proposed changes, Pooled Registered Pension Plans will generally be treated as a trust for tax purposes, the administrator is the trustee and the members are the beneficiaries. A pooled registered pension plan trust will be excluded for purposes of the 21 year deemed disposition rule and other specified measures. In addition, when certain criteria are met, a pooled registered pension plan trust will be exempt from Part I tax.

For more information, please refer to Department of Finance Press Release 2011-134.

Qualifying environmental trust (QET)

Generally, this is a trust resident in Canada or a province, or a corporation resident in Canada that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, or that is not an excluded trust and maintained at that time for the sole purpose of funding the reclamation of a qualifying site in Canada or in the province that is, or may become, required to be maintained under the terms of a qualifying contract, or a qualifying law that and that had been used primarily for, or for any combination of:

• the operation of a mine;
• the extraction of clay, peat, sand, shale or aggregates (including dimension stone and gravel);
• the deposit of waste; or
• If the trust was created after 2011, the operation of a pipeline.

The definition also requires the maintenance of the trust is or may become required by a federal or provincial law or under the terms of a contract entered into with the federal or provincial Crown. Certain conditions exist that may exclude a trust from being a QET. For more information, please see the definition of a QET in subsection 211.6 (1) of the Act.

Real estate investment trust (REIT)

A trust is a real estate investment trust (REIT) for a taxation year, if it is resident in Canada throughout the year and meets a number of other conditions, including the requirement that the trust derives at least 75% of its revenues from rent from, and capital gains from the dispositions of, real or immovable property, and interest from mortgages on real or immovable property. A SIFT (specified investment flow through) trust does not include a real estate investment trust (REIT).

• the rent from real or immovable properties;
• interest;
• capital gains from dispositions of real or immovable properties;
• dividends; and
• royalties.

Registered disability savings plan (RDSP) trust

An RDSP trust has to complete and file a T3 return if the trust has borrowed money and subparagraph 146.4(5)(a)(i) or 146.4(5)(a)(ii) of the Income Tax Act applies. If this does not apply and the trust carried on a business or held non-qualified investments (as defined in subsection 205(1)) during the tax year, you have to complete a T3 return to calculate the taxable income from the business or non-qualified investments. If the trust is reporting capital gains or losses, it has to report the full amount (that is, 100%) on line 01 of the T3 return.

Registered education savings plan (RESP) trust, registered retirement income fund (RRIF) trust, or registered retirement savings plan (RRSP) trust

An RESP, RRIF, or RRSP trust has to complete and file a T3 return if the trust meets one of the following conditions:

• the trust has borrowed money and paragraph 146(4)(a) or 146.3(3)(a) of the Income Tax Act applies;
• the RRIF trust received a gift of property and paragraph 146.3(3)(b) of the Income Tax Act applies; or
• the last annuitant has died and paragraph 146(4)(c) or subsection 146.3(3.1) of the Income Tax Act applies. If this is the case, claim an amount on line 43 of the T3 return only if the allocated amounts were paid in accordance with paragraph 104(6)(a.2) of the Income Tax Act.

If the trust does not meet one of the above conditions and the trust held non-qualified investments during the tax year, you have to complete a T3 return to calculate the taxable income from non-qualified investments, determined under subsection 146(10.1) or 146.3(9) of the Income Tax Act. If the trust is reporting capital gains or losses, it has to report the full amount (that is, 100%) on line 01 of the T3 return.

If the trust does not meet one of the above conditions and the trust carried on a business, you have to complete a T3 return to calculate the taxable income of the trust from carrying on a business. Do not include the business income earned from the disposition of qualified investments for the trust.

Retirement compensation arrangement (RCA)

This arrangement exists when an employer makes contributions for an employee's retirement, termination of employment, or any significant change in services of employment.

For more information, see Guide T4041, Retirement Compensation Arrangements Guide.

Note

You have to file a T3 return for the portion of an RCA that is treated as an employee benefit plan. Form T3-RCA, Retirement Compensation Arrangement (RCA) – Part XI.3 Tax Return, has to be filed to report the income of the other portion of the plan.

Salary deferral arrangement

Generally, this is a plan or arrangement (whether funded or not) between an employer and an employee or another person who has a right to receive salary or wages in a year after the services have been performed. For more information, see Interpretation Bulletin IT529 – Flexible Employee Benefit Programs.

Note

If a salary deferral arrangement is funded, we consider it a trust, and you may have to file a T3 return. The deferred amount is deemed to be an employment benefit, so you report it on a T4 slip, not a T3 slip. The employee has to include the amount in income for the year the services are performed. The employee also has to include any interest, or other amount earned by the deferred amount. For more information, see Guide RC4120, Employers' Guide - Filing the T4 Slip and Summary.

Specified investment flow-through (SIFT) trust

This is a trust (other than a trust that is a real estate investment trust for the tax year or an entity that is an excluded subsidiary entity) that meets all of the following conditions at any time during the tax year:

• the trust is resident in Canada;
• investments in the trust are listed or traded on a stock exchange or other public market; and
• the trust holds one or more non-portfolio properties.

For more information, go to Specified investment flow-through (SIFT) trust income and distribution tax.

Specified trust

This is an inter vivos trust that is:

• an amateur athlete trust;
• an employee trust;
• a master trust;
• a trust governed by:
  • a deferred profit sharing plan
  • an employee benefit plan,
  • an employees profit sharing plan,
  • a foreign retirement arrangement,
  • a registered education savings plan,
  • a registered pension plan,
  • a registered retirement income fund,
  • a registered retirement savings plan, or
  • a registered supplementary unemployment benefit plan;
• a related segregated fund trust;
• a retirement compensation arrangement trust;
• a trust whose direct beneficiaries are one of the above mentioned trusts;
• a trust governed by an eligible funeral arrangement or a cemetery care trust;
• a communal organization; and
• a trust where all or substantially all of the property is held for the purpose of providing benefits to individuals from employment or former employment.

Spousal or common-law partner trust

A post-1971 spousal or common-law partner trust includes both a testamentary trust created after 1971, and an inter vivos trust created after June 17, 1971. In either case, the living beneficiary spouse or common-law partner is entitled to receive all the income that may arise during the lifetime of the spouse or common-law partner. That spouse or common-law partner is the only person who can receive, or get the use of, any income or capital of the trust during his or her lifetime.

A pre-1972 spousal trust includes both a testamentary trust created before 1972, and an inter vivos trust created before June 18, 1971. In either case, the beneficiary spouse was entitled to receive all the income during the spouse's lifetime, and no other person received, or got the use of, any income or capital of the trust. These conditions must be met for the period beginning on the day the trust was created, up to the earliest of the following dates:

• the day the beneficiary spouse dies;
• January 1, 1993; or
• the day on which the definition of a pre-1972 spousal trust is applied.

Tax-free savings account (TFSA) trust

A trust governed by a TFSA is generally non-taxable. Where the funds in the TFSA trust are used in the carrying on of a business or used to acquire non-qualified investments, the trust will be taxable to the extent of the income earned from that business or those investments. For more information, see "Line 21 - Non-qualified investments for TFSA, RRSP, RRIF and RDSP trusts" in Guide T4013, T3 Trust Guide or go to The Tax-Free Savings Account.

Unit trust

This is an inter vivos trust for which the interest of each beneficiary can be described at any time by referring to units of the trust. A unit trust must also meet one of three conditions as described in subsection 108(2) of the Income Tax Act.