T3 Slip
Feuillet T3 in French
Quick definition
The T3, Statement of Trust Income Allocations and Designations, reports income a trust paid out to you. Since most mutual funds and many ETFs are legally trusts, this is the slip most Canadian investors receive for their fund distributions.
Why fund investors get T3s
A T3 comes from a trust, and in practice that means far more than estates: most mutual funds and the majority of Canadian ETFs are structured as trusts. Every distribution they pay lands on a T3, and the trust structure has a valuable property: income keeps its character as it flows through to you. Capital gains realized inside the fund are still capital gains on your return, eligible dividends are still eligible dividends, each with its own tax treatment. A T5 slip covers income paid directly by banks and corporations; the T3 covers everything that flowed through a trust first.
| Box | What it reports |
|---|---|
| 21 | Capital gains (50% taxable) |
| 49 / 51 | Eligible dividends: actual / taxable amount |
| 26 | Other income, such as interest (fully taxable) |
| 42 | Return of capital (not taxed now, adjusts your ACB) |
Box 42: the return of capital trap
Box 42, return of capital (ROC), is the part of a distribution that is simply your own money handed back. It is not taxed in the year you receive it, which makes it easy to ignore, but it reduces your [adjusted cost base](/dictionary/adjusted-cost-base). Skip that adjustment year after year and your recorded ACB stays too high, so the capital gain you eventually report on selling is too low, an error the CRA can reassess. The mirror case: reinvested (phantom) distributions, common with ETFs, increase your ACB, and forgetting them means paying tax twice on the same growth.
Why T3s arrive late
Trusts have 90 days after their year-end to issue T3s, so slips for a December 31 year-end can legally arrive as late as the end of March, weeks after the February deadline for T5s. This is the classic reason investors with fund holdings in taxable accounts should not file in early March: a T3 that arrives after you file means an amended return.
In Canada
Québec residents receive a Relevé 16 alongside the T3 for the provincial return. The CRA gets a copy of every T3 and makes it available through My Account and Auto-fill my return, which is the practical safety net for slips that arrive at the very end of March. Note that funds structured as corporations rather than trusts, a minority, issue T5s instead.
Worked example
Marc holds an ETF in a taxable account. His T3 shows $400 in box 21 (capital gains), $300 in boxes 49 and 51 (eligible dividends) and $250 in box 42 (return of capital). He reports the gains and dividends, pays nothing on the $250, but reduces his ACB from $20,000 to $19,750. When he sells years later, that lowered ACB adds $250 to his gain: the ROC was tax deferred, not tax-free.
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated July 2026