Teitelbaum – Quebec Court of Appeal finds that an RCA balance (viewed as a “right or thing”) was “transferred” on death notwithstanding its subsequent distribution
ITA 70(3) requires “rights or things” of a deceased taxpayer to be recognized in the taxpayer’s terminal return unless the executors elect to include those amounts in a separate return. However, s. 70(3) overrides this rule, and provides that, where the rights or things have been transferred to a beneficiary within one year of the death, the amounts received by the beneficiary on the realization or disposition of the rights or things are to be included in the beneficiary’s income.
The will of the deceased common-law partner of the taxpayer designated her as the beneficiary of all his “pension plans.” Gagnon JCA accepted that this had the effect of bequeathing to her the value of his RCA, with that legacy being paid in two lump sums paid more than one year after the deceased’s death.
The taxpayer argued because she received these two sums more than one year after his death, they were not includible in her income under the Quebec equivalent of s. 70(3)) as a legacy pursuant to this designation. Gagnon JCA stated:
This argument confounds the debt claim bequeathed by the deceased with the liquidation of that same claim by the Trust. The Taxpayer could not be the heir of the deceased other than by what she received on the date of his death. …
In sum, I am of the view that the debt claim bequeathed to the Taxpayer was transferred to her on … the date of death of Mr. Lewin. This is a transaction described by TA section 430. The reference in this provision to the time of the realization of this right bears only on the determination of the year in which the amounts received must be included in the income of the taxpayer.
Thus, although the “transfer” to her occurred on Mr. Lewin’s death, she was not required to include any amount in her income until she received the amounts in her subsequent taxation year (when the amounts were “realized”).
Neal Armstrong. Summary of Agence du revenu du Québec v. Teitelbaum, 2019 QCCA 1408 under s. 70(3).