  Bankruptcy |
Use the keyword Bankruptcy to choose the type of bankruptcy return you are preparing. Complete the pre-bankruptcy return as the tax return for the bankrupt, and use the planning mode to prepare post-bankruptcy and trustee returns in plans. For further information, see the document Preparing a bankruptcy return.
For further information on the processing rules for bankruptcy returns, see the document Processing rules for bankruptcy returns (2023).
Federal
Paragraphs 118.95(a) and (b) indicates that the credit being claim should be allocated on a reasonable basis. The Agency calculates these non-refundable tax credits on a pro-rata basis (except for those credit that are based on expenditures or the receipt of certain types of income during the period). The personal tax credits described in paragraph 118.95(b) are prorated based on the number of days in the taxation year. The total amounts claimed in both the pre-bankruptcy and post-bankruptcy returns cannot exceed the amount that would have been deductible had the client not become bankrupt.
The amounts to be carried forward from the pre-bankruptcy return are calculated and must then be verified and copied into the post-bankruptcy return. The amounts carried forward from the post-bankruptcy return are entered into the following year's tax file.
Proposal in bankruptcy or consumer proposal
Before declaring bankruptcy, or even during the bankruptcy process, a person may make a payment offer to his or her creditors (a proposal in bankruptcy or a consumer proposal, as applicable) and thereby change his or her obligations in their regards. In such a case the person may elect to file two income tax returns, even though he or she has not gone bankrupt.
If you filed a proposal in bankruptcy or a consumer proposal, you are not considered to have gone bankrupt. Therefore, you may file a single income tax return for the entire year. However, if you decide to file two returns, you must, as a rule, follow the instructions given for persons who went bankrupt in 2023. If you are filing two returns, indicate on each return the date of the proposal in bankruptcy or consumer proposal, and specify the period covered by the return.
Proposal in bankruptcy
A payment offer made by an insolvent person to his or her creditors in order to avoid bankruptcy, or by a bankrupt to end his or her bankruptcy.
Consumer proposal
A payment offer similar to a proposal in bankruptcy, but subject to a fast-track procedure. It may be made by a bankrupt or an insolvent person whose total debts, excluding those secured by his or her principal residence, do not exceed $250,000 (or any other prescribed amount).
The following options are applicable for the keyword Bankruptcy.
Pre-bankruptcy return Pre-bankruptcy return
This return includes income from January 1 to the day prior to the date of bankruptcy. This period is considered to be a complete "taxation year". All income earned by the bankrupt during this period should be included on the T1. The trustee is responsible for the filing of this return, which is due April 30th of the year following the year of bankruptcy
Report all income, losses and normal deductions of the bankrupt individual up to the day before the bankruptcy. This return is for a taxation year with a deemed year end on the day before declaration of bankruptcy. On becoming bankrupt, control of the individual's assets are transferred to the trustee. However, ownership remains vested in the bankrupt individual. Consequently, there is no deemed disposition, and no terminal loss or depreciation recapture at this time. Since this is a short taxation year, capital cost allowance must be pro-rated for a short fiscal year. A business operated by the bankrupt does not have a deemed year end and continues under the direction of the trustee. Hence, any income or loss from the business up the bankruptcy date must be reported in the pre-bankruptcy return and any income or loss from the business after the bankruptcy date must be reported on the trustee's return.
Post-bankruptcy return Post-bankruptcy return
The return covers the period from the date of bankruptcy to December 31 of the taxation year. This period is considered to be a complete "taxation year". This return, together with the pre-bankruptcy return, will account for the total income for the complete year. The individual, not the trustee, is responsible for filing and paying any balance due on the post-bankruptcy return. The return is due April 30th of the year following the year of bankruptcy
Report any income not included in the trustee's return (e.g. employment income). You may not claim any carryovers of losses of any kind in this return; these are available only to the trustee. It appears that you may claim any personal credits on this return (there's no mention of this being disallowed).
Trustee's return Trustee's return (In-Bankruptcy Tax Return, or a Trust Return)
This type of return is uncommon as it mainly concerns the business income and assets belonging to the client in bankruptcy. It includes income from disposition of capital property, liquidated assets (i.e. Registered Retirement Savings Plans) or from businesses the trustee winds up for the benefit of creditors. The period covered by the return is from the date of bankruptcy to December 31st or, where only self-employed income is reported, the termination of the business, whichever is first. This period is considered to be a complete "taxation year". Additional returns of this type may be filed where the operation of the business extends into another taxation year. The trustee is responsible for the filing of this return and is due within 90 days from the end of the calendar year.
The trustee return may neither claim any personal tax credits nor include any deductions in computing taxable income, except for loss carryovers. The trustee return must be filed by the end of March of the following year.
Pre-proposals return Pre-proposals return
For pre-proposals returns covering the period prior to proposals returns.
The pre-proposals return is treated like the pre-bankruptcy return.
Post-proposals return Post-proposals return
For post-proposals returns covering the period from the date of the proposals returns to December 31.
The post-proposals return is treated like the post-bankruptcy return.
Use the keyword BankruptDate to enter the date of filing for bankruptcy, and to select whether or not you want that date printed at the top of page 1 of the federal return.
The date of bankruptcy is used by DT Max to prorate amounts between the pre-bankruptcy and post-bankruptcy returns.
The following options are applicable for the keyword BankruptDate.
Use the keyword Release-Date to enter the date when the client was released from bankrupt status.
Use the keyword PostBank-NI to enter the post-bankruptcy net income (Line 23600 of the federal tax return). The amount will be used to determine the age amount at line 30100 and the spouse or common-law partner amount at line 30300 of the federal tax return, as for the pre-bankruptcy return, the net income for the entire year must be used. Use [Alt-J] to enter different values for other jurisdictions.
Use the keyword PostBank-TaxInc to enter the post-bankruptcy taxable income (Line 26000 of the federal tax return). The amount will be used to determine the enhancement of the basic personal amount, spousal amount and dependant amount of the Nova Scotia tax return, as for the pre-bankruptcy return, the taxable income for the entire year must be used.
Post-bankrupty family income (MB479 L.5)
Use the keyword PreBank-Fed to enter the amounts from the pre-bankruptcy tax return.
The description of information required from the pre-bankruptcy return for purposes of the post-bankruptcy return is entered using PreBank-Fed .
Use the keyword Pre-FedChildCare to specify which of the spouses should claim the federal child care in the pre-bankruptcy return. Keep in mind that the program cannot determine who should claim the federal child care based on the lower net income if the other spouse is not bankrupt at the same time.
The following options are applicable for the keyword Pre-FedChildCare.
Use the keyword QPP-Election for the election pertaining to the calculation of the QPP contribution for self-employment.
If the individual earned income from self-employment or as a person responsible for a family-type resource or an intermediate resource, this individual may elect to contribute to the Quebec Pension Plan (QPP) while taking into account the income amounts subject to this contribution for the whole calendar year. The election must be made in the return that precedes the bankruptcy (pre-bankruptcy). In making the choice, the QPP contributions will be made only in the return for the period following the bankruptcy (post-bankruptcy) taking into account the income amounts before and after bankruptcy that are subject to this contribution. DT Max will check the corresponding box on line 21 of the tax return for the period preceding the bankruptcy.
The following options are applicable for the keyword QPP-Election.
Use the keyword PreBank-QPP-Elect to indicate the choice made in the pre-bankruptcy return pertaining to the calculation of the QPP contribution for self-employment.
If the individual earned income from self-employment or as a person responsible for a family-type resource or an intermediate resource, this individual may elect to contribute to the Quebec Pension Plan (QPP) while taking into account the income amounts subject to this contribution for the whole calendar year. The election must be made in the return that precedes the bankruptcy (pre-bankruptcy). In making the choice, the QPP contributions will be made only in the return for the period following the bankruptcy (post-bankruptcy) taking into account the income amounts before and after bankruptcy that are subject to this contribution. DT Max will check the corresponding box on line 21 of the tax return for the period preceding the bankruptcy.
The following options are applicable for the keyword PreBank-QPP-Elect.
Use the keyword PreBank-Que to enter the amounts from the pre-bankruptcy tax return.
The description of information required from the pre-bankruptcy return for purposes of the post-bankruptcy return is entered using PreBank-Que .
Date amended of the bankruptcy form [DC905]
Use the keyword Estate-Number to indicate the number of the estate. The DC095 form has to be completed as soon as the taxpayer's estate number is received from the Office of the Superintendent of bankruptcy (OSB).
This firm number will override the trustee number setting in the identification section of the preferences menu. This number will appear on top of page one of the tax return as well as on the special bankruptcy schedules.
This trustee individual number will override the trustee individual number setting in the identification section of the preferences menu.
All goods and services/harmonized sales tax credit (GSTC/HSTC) cheques will be sent c/o the Trustee until the CRA obtains a date of discharge for the taxpayer from the OSB or if instructed by the Trustee to do otherwise. - If you do NOT want to receive these amounts, check ( X ) the NO box
- If, at a later date, you would like to resume receiving these amounts, send us a revised version of this form with a check ( X ) in the YES box.
- If this is an amended copy please check ( ) the ôAmendedö box in Section A (above) and provide the date of amendment.
Select "Yes" if you want to receive the GSTC/HSTC for this taxpayer [DC905]
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BankruptDate 