# Trusts and Taxes



## dubmac (Jan 9, 2011)

Hi all...

Both my kids (15 yrs and 13 yrs old) are the benefactors of an inter-vivos trust that their grandfather provided for them prior to his passing several years ago. In September 2010 we withdrew $12,500 from each trust to help pay for school fees and some of their travel & sports fees. The trsust have been (very conservatively invested - I recall that about $3,500 (on 300K) has been earned in interest in one trust, and $1,750.00 (on 150K) in the other. 

Given that we have withdrawn funds from these trusts, CRA states that we must file tax information for these trusts by March 31 2011 for the 2010 year.

Both kids receive a bursary from the school they attend - each has rec'd about $8,000 from the school they attend - Each son has rec'd a T4A for the amount they will claim in their taxes.

Question: 

Is the $12,500 that has been withdrawn considered taxable income for each of my sons?

(If so, I am surprised since the funds were deposited were after tax dollars invested by their grandfather.)

The problem that I face is that with the bursary amount, as well as the interest from the trusts will amount to around 16K and $9,750.00 per boy. Each boy will have "earned" more than than the 10,300 in basic exemption, and the potential tax bill may be quite high.

Any one got any experience with this?


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## Henry (Jul 12, 2009)

Good news is that bursaries and scholarships are no longer taxable income. This was changed in 2006.

I am not familiar with how inter-vivos trust is taxed after the settler dies.


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## dubmac (Jan 9, 2011)

Henry said:


> Good news is that bursaries and scholarships are no longer taxable income. This was changed in 2006.
> 
> I am not familiar with how inter-vivos trust is taxed after the settler dies.


Henry..thanks for the reply..

Do I understand correctly that even tho the school sent my son(s) a T4A (Staement of Pension, retirement, Annuity and Other Income) form in the amount of 8K that he does not need to submit claim the amount on his 2010 taxes? Seems strange to me that they would bother sending the form.


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## Potato (Apr 3, 2009)

dubmac said:


> Henry..thanks for the reply..
> 
> Do I understand correctly that even tho the school sent my son(s) a T4A (Staement of Pension, retirement, Annuity and Other Income) form in the amount of 8K that he does not need to submit claim the amount on his 2010 taxes? Seems strange to me that they would bother sending the form.



No, you input it into the appropriate place on the tax return. If it's an eligible bursary then there will be no tax on that income (it'll depend on what line number the income appears on on the T4A).


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## dubmac (Jan 9, 2011)

Potato said:


> No, you input it into the appropriate place on the tax return. If it's an eligible bursary then there will be no tax on that income (it'll depend on what line number the income appears on on the T4A).


It's in Box 28 of the T4A


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