Where in a year (the “Repayment Year”) an estate must repay, on behalf of the deceased, overpaid old age security ("OAS") pension benefits received in previous taxation years, how should the deduction be made for the repayment?
CRA noted that s. 60(n) permitted the deduction in the Repayment Year of the repayment of overpaid OAS benefits, which were not deducted in computing taxable income.
CRA further noted that if the taxpayer's income was insufficient in the Repayment Year to make full use of the s. 60(n) deduction, s. 60(n.2) allowed the taxpayer to deduct the amount repaid in computing income for the taxation year in which the overpayment was received and included in income under s. 56(1)(a)(i) to the extent that the amount repaid exceeded the taxpayer's taxable income in the Repayment Year and was not otherwise deducted in computing taxable income.
In response to the question, CRA stated:
Where the repayment of overpaid OAS benefits is made by an estate, the deduction provided for in paragraph 60(n) or paragraph 60(n.2), as the case may be, is not available where the amount of the OAS benefit was received and included in computing the income of the deceased taxpayer (and not in that of the estate) in the Repayment Year or a prior year. Indeed, the deduction under paragraphs 60(n) and 60(n.2) is available only to the extent that the amount was included in computing the income of the taxpayer claiming the deduction.
We have advised the Department of Finance of our conclusion.
