Schedule 12 - Minimum Tax

If the trust is subject to a minimum tax, it may have to pay minimum tax in the year. The following types of trusts are not subject to minimum tax and do not need to complete Schedule 12:

• A spousal or common-law partner trust, a joint spousal or common-law partner trust, or an alter ego trust if it reports in the year its first deemed disposition on Form T1055, Summary of Deemed Dispositions (2002 and later tax years).

• If the trust was one of the following throughout the tax year:

  • a mutual fund trust

  • a related segregated fund trust

  • a master trust

  • an employee life and health trust

Minimum tax limits the tax advantage a trust can receive in a year from certain incentives. The most common situations that may make a trust liable to minimum tax are if it:

• reports taxable capital gains (line 1 of the return)

• reports taxable dividends (line 3 of the return)

• claims a loss resulting from, or increased by, resource expenditures, or claims resource and depletion allowances on resource properties (line 6 or line 11 of the return)

• claims a loss resulting from, or increased by, capital cost allowance (CCA) or carrying charges claimed on a rental or leasing property (line 8 of the return), or certified films or videotapes (line 6 of the return)

• has certain losses that limited partners, specified members of a partnership, or partners of a registered tax shelter deduct for their partnership interest (for this purpose, losses allocated from a partnership are applied against gains from the same partnership source)

  Note
  

  For tax years ending after December 31, 2011, a trust's limited partnership loss is restricted only if the trust's interest in the partnership is a registered tax shelter. This treatment may also apply to the trust's 2006 to 2011 tax years, where the trust filed an election by March 11, 2014.

• has losses from an investment in a registered tax shelter

• has carrying charges for interests in limited partnerships, tax shelters, rental or leasing properties, or film or resource properties, that increase or create a loss from these sources

  Note
  

  Net income from rental, leasing, and film property includes income from these investments (before CCA and related carrying charges) plus any net taxable capital gains from the disposition of these investments minus any losses from these investments (before CCA and related carrying charges). You also have to subtract allocated partnership losses from gains from the same partnership source.

The trust has to pay minimum tax if it is more than the federal tax calculated in the usual manner.

Alternative Minimum Tax

For 2016 and subsequent tax years, the $40,000 basic exemption is applicable to graduated rate estate only.

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