Determine Income Available for Allocation to Beneficiaries

Certain kinds of income can be "designated" to receive special treatment when "allocated" by a trust to a beneficiary (i.e. designation results in the allocated income "retaining its character"). For example, if Canadian dividends are designated to a beneficiary, the beneficiary reports the gross-up and claims the related dividend tax credit (and not the trust). The amount in each of the various pools of income available for allocation to beneficiaries is determined on the S9SUP form. On this form, you apportion the various deductions and expenses of the trust to the various categories of income. Essentially, you are determining what the "net income" is composed of. This is done in the table near the top of the S9SUP form.

After completing the expense allocation table, you can then optionally specify amounts from various pools that should not be made available for allocation to beneficiaries (i.e. "Retained in Trust"). For example, the trust document might indicate that certain amounts cannot be paid out. The final result is the "Total amounts available for designation to beneficiaries" at the bottom of the S9SUP form. These are key amounts used by the BENEF form (discussed below).

Finally, you might be wondering what "deemed income" and "deemed capital gains" are. These are the gains reported on form T1055 that result from the deemed disposition of all the trust's property every 21 years or upon the death of a spouse or common-law partner that is the beneficiary of the trust set-up for spouse or common-law partner.