A T3 slip reports income allocated to a beneficiary from a trust or estate, so the beneficiary can report it on their personal tax return.
When a trust or estate allocates income to a beneficiary rather than keeping it, it issues a T3 Statement of Trust Income Allocations and Designations. The beneficiary reports that income, which may retain its character as dividends, capital gains or other income, on their T1. Income kept in the trust is taxed in the trust instead.
T3 slips also come from mutual funds and ETFs held outside registered accounts, reporting distributions of income and capital gains. Because T3s are issued later than most slips (the trust filing deadline is 90 days after year-end), they are a common reason to wait before filing a personal return.
A family trust allocates $20,000 of dividend income to a beneficiary. The trust issues a T3 showing the dividends, and the beneficiary reports them on their personal return with the dividend tax credit.
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