29 February 2000 External T.I. 2000-0006115 - DEATH SUBSEQUENT RRSP INCOME AND LOSS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

1) When there is an increase in value in an RRSP after the date of death , how is the income taxed to the estate?

2) Where an RRSP incurs a loss subsequent to the death of its annuitant, can the beneficiaries of the RRSP claim that loss?

Position:

1) When amounts are paid out of the RRSP to the estate in excess of the amount taxed to the deceased under subsection 146(8.8) they are taxed pursuant to 146(8) of the Act.

2) No

Reasons:

1) Amount is a benefit out of an RRSP

2) There is no provision in the Act that allows for the loss to flow through to the RRSP beneficiaries.

XXXXXXXXXX 						2000-000611
M. P. Baldwin
Attention :XXXXXXXXXX  

February 29, 2000

Dear Sirs:

Re: Subsections 146(8.8), 146(4) and 146(1) of the Income Tax Act (the "Act")

This is in reply to your letter of December 15, 1999 in which you request clarification of the rules pertaining to the inclusion of income on the death of an annuitant of a registered retirement savings plan ("RRSP").

The Canada Customs and Revenue Agency's (the "Agency") general views are found in Interpretation Bulletin IT-5000R titled "Registered Retirement Savings Plans - Death of an Annuitant."

When the annuitant under an RRSP dies (whether before or after its maturity) and assuming the spouse is not the beneficiary of the RRSP property, subsection 146(8.8) of the Act deems the annuitant to have received, immediately before death, a benefit equal to the fair market value of all property of the RRSP. This benefit is included in the deceased annuitant's income under subsection 146(8) of the Act.

Paragraphs 21, 22 and 23 of IT-500R provide the Agency's view regarding the taxation of income earned by the RRSP after death and how it is taxed either in the hands of the recipient or in the RRSP trust. Where the RRSP property is paid to the estate on or before December 31 of the year following the year of the annuitant's death, the increase in value in the RRSP since the death will be taxable to the estate pursuant to subsection 146(8) of the Act.

When there is a decrease in the value of the RRSP property between the date of the annuitant's death and the date that the RRSP property is distributed to the estate, the decrease represents a loss incurred by the RRSP. There is no provision in the Act that allows the beneficiary to claim the loss incurred by the RRSP. Consequently, the amount included in the deceased annuitant's income on death may be greater than the total value of the property eventually distributed to the beneficiaries of the RRSP.

We trust that the above comments will be of assistance to you.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate