T3 slip (Statement of Trust Income Allocations and Designations)

Who sends one and why you may receive it

A trust prepares a T3 slip for each resident beneficiary to whom it allocated income during the year, and also where a capital distribution changes the cost base of the beneficiary’s interest. Investors often meet it through a fund held in a non-registered account, and an estate or family trust can also issue one. If the trust allocated less than $100 to you, it does not have to prepare a slip, but you must still be told, and the income is still reportable.

The trust sends its slips and summary to the CRA no later than 90 days after the end of the trust’s tax year, and it must give you your copy. A digital copy is allowed only with your consent. Because the trust’s year-end is not always December 31, the timing can differ from a T5 or T4 slip, so confirm it with the issuer.

What the main boxes tell you

Box 21 shows capital gains. You subtract any amount in box 30, which flags gains eligible for a deduction, and carry the result to Schedule 3. Dividends from Canadian corporations are spread across boxes 23, 49, 32, 50, 39 and 51: the taxable amounts in boxes 32 and 50 are income, and boxes 39 and 51 together give the federal dividend tax credit. Box 26 shows other income, reported after subtracting box 31.

Foreign income also appears here. Box 25 reports foreign non-business income and box 34 the foreign tax paid, which feed into the federal foreign tax credit form. Box 42 shows a return of capital, which does not add to income but should reduce the adjusted cost base of your units.

An illustrative example

Illustrative example: you hold units of a fund in a non-registered account and never sell them. Your T3 shows $400 in box 21 and $600 in box 26, and the distributions were reinvested rather than paid out. You still report both amounts for the year, because the allocation, not the cash, creates the income. Reinvested distributions can affect your adjusted cost base, so keep a running record of them to avoid paying tax twice when you eventually sell. Figures are illustrative only.

Common mistakes and what to ask your accountant

The usual errors are skipping a T3 because no cash arrived, ignoring box 42 so that the cost base stays too high, and treating it as a duplicate of a T5. A T3 also differs from a T5008, which reports a sale rather than income earned along the way. Slips can be amended, so expect a corrected version if the trust revises its figures.

Ask your accountant how each box lands on the return, whether foreign tax can be claimed and how to track the adjusted cost base. Bring every slip, the year-end fund statements and your purchase history.