Citation: 2007TCC502
Date: 20071018
Docket: 2007-587(IT)I
BETWEEN:
GAIL
L. BÉLANGER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1] This is an appeal from
an assessment dated March 31, 2006, made by the Minister of National
Revenue (the Minister). The Notice of Assessment informed the appellant that
she had been assessed an amount of $6,248.12 as her income tax liability in
respect of the amount of $15,606.44 she had received on January 1, 1998
out of a registered retirement income fund (RRIF) of her late mother, Lillis V.
Bartlett. The appellant having duly filed an objection, her assessment was
confirmed by the Minister on November 9, 2006.
[2] The appellant’s
mother passed away on December 15, 1997. She was the last annuitant of a RRIF
and the appellant was one of the designated beneficiaries of the said RRIF, of
which her share was the amount referred to above, and on this amount she was
assessed as previously indicated.
[3] The appellant
testified that her mother intended her children to receive her RRIF directly
and not through her estate. The appellant also testified that it was her
mother’s intention that the taxes payable on the RRIF be paid by her estate. A
copy of her mother’s will does direct the executor of her estate to pay her
just debts and to pay out of the capital of the trust property such Canadian or
provincial income tax as may from time to time be payable.
[4] The Canada Revenue
Agency (the Agency) attempted over a number of years to collect from the estate
the taxes owed on the RRIF, but without success. The assessment under appeal in
this case was therefore issued against the appellant under the provisions of
subsection 160.2(2) of the Income Tax Act (the Act), which
provides as follows:
(2) Joint and several liability in
respect of amounts received out of or under RRIF – Where
(a) an amount is received out of
or under a registered retirement income fund by a taxpayer other than an
annuitant (within the meaning assigned by subsection 146.3(1) under the
fund, and
(b) that amount or part thereof
would, but for paragraph 146.3(5)(a), be included in computing the
taxpayer’s income for the year of receipt pursuant to subsection 146.3(5),
the taxpayer and the annuitant are
jointly and severally liable to pay a part of the annuitant’s tax under this
Part for the year of the annuitant’s death equal to that proportion of the
amount by which the annuitant’s tax for the year is greater than it would have
been if it were not for the operation of subsection 146.3(6) that the amount
determined under paragraph (b) is of the amount included in
computing the annuitant’s income by virtue of that subsection, but nothing in
this subsection shall be deemed to limit the liability of the annuitant under
any other provision of the Act.
[5] The appellant
submits that the Agency’s failure to collect the tax owed from the estate and its
attempt to collect it from the beneficiaries are not fair. She further argues
that the amount of tax payable should be determined through the filing of a tax
return by the estate, which the estate has failed to do. The appellant is
asking this Court to hold the executor of the estate of her late mother
accountable for any liability of the estate and to appoint a new executor. With
regard to these latter requests, this Court has no jurisdiction to hold the
executor of the estate accountable or to appoint a new executor.
[6] The issue to be
decided is whether the appellant is liable for income tax of $6,248.12 in
respect of the amount of $15,606.44 she received on January 1, 1998 out of
her mother’s RRIF as her share of the said RRIF.
[7] Benefits received
by a taxpayer in a year under a RRIF must be included in computing the income
of that taxpayer for that year under subsection 146.3(5). Paragraphs 146.3(5)(a)(b)
and (c) of the Act provide exceptions that can reduce this income
inclusion, but none of these was raised in argument nor are they applicable in
this case. Subsection 146.3(6) of the Act provides that when the last
annuitant under a RRIF dies, that annuitant is deemed to have received,
immediately before death, an amount under the RRIF equal to the fair market
value of the property of the fund at the time of the death. The fair market value
of the property of the fund (the benefits) thus deemed to have been received by
the appellant’s mother must be included in her income pursuant to subsection 146.3(5).
[8] This therefore
makes the estate liable for any income tax owed on these benefits, for the
appellant’s mother is deemed to have received the funds before she died.
[9] The Act also has
provisions that render the annuitant (or the estate in the case at bar) and a
taxpayer other than the annuitant jointly and severally liable in respect of
amounts received out of or under a RRIF. See subsection 160.2(2) supra.
[10] Subsection 160.2(3)
allows the Minister to assess the appellant at any time for any amount payable
under section 160.2 but does not indicate any obligation on the Minister
to attempt to collect that amount from the estate before issuing the
assessment. Subsection 160.2(3) reads as follows:
160.2(3) Minister may assess recipient
The Minister may at any time assess a
taxpayer in respect of any amount payable by virtue of this section and the
provisions of this Division are applicable, with such modifications as the
circumstances require, in respect of an assessment made under this section as
though it had been made under section 152.
That, in my opinion, makes the appellant liable with
respect to the tax payable.
[11] The appellant questions
the amount of tax assessed and payable under the joint liability provisions.
The amount of tax payable, according to the appellant, must be determined
through the filing of a tax return by the estate. Although the evidence does
not enable us to say with certainty whether the estate has filed a tax return
or not, the appellant has testified that none was filed by the executor of the
estate.
[12] Subsection 160.2(2),
quoted above, provides for the joint and several liability of the annuitant and
the taxpayer to pay the annuitant’s tax for the year of the annuitant’s death.
The annuitant’s tax for which they are liable is equal to the tax liability of
the estate, including the benefits from the RRIF, less the result of a second
calculation of the tax liability of the estate, but this time excluding any
benefits that would normally have to be included by virtue of subsection 146.3(6)
of the Act. The difference between the two tax calculations is the amount which
the appellant and the annuitant (estate) are jointly and severally liable to
pay.
[13] The evidence does
not disclose how the Minister calculated the appellant's tax liability, which
comes to roughly 40% of the amount received by her. Subsection 160.2(2) is
clear in indicating that the annuitant or the estate in this case, must first
be assessed for the tax on the benefits from the RRIF in order that the amount
of tax payable under the joint liability provisions may be determined.
[14] The appellant is of the firm belief that no tax returns
were filed for the estate and I accept her evidence in that regard. The
appellant is liable, but the amount for which she is liable must be determined pursuant
to the provisions of the Act. I therefore allow the appeal and refer the
assessment back to the Minister for reconsideration and reassessment in
accordance with these reasons.
Signed at Ottawa, Canada,
this 18th day of October 2007.
"François Angers"
Email this Content