CRA finds that the FMV of an FHSA which is not distributed by the second year of the last holder’s death is, absent designations of beneficiaries, included in the estate’s income

S. 146.6(16)(a)(ii) provides that an FHSA ceases to be an FHSA at the end of the year following the year of death of the last holder. If this occurs, s. 146.6(17)(c) provides that the proportion of the FMV of all the (former) FHSA property that a beneficiary is entitled to at that time is deemed for purposes of s. 146.6(14) to be distributed at that time from the FHSA to the beneficiary, so that such deemed amount is included in the beneficiary’s income for the year under s. 146.6(14).

CRA confirmed that, in this situation, where the deceased last holder had designated three siblings as equal beneficiaries under the FHSA in accordance with provincial law, then each of the three siblings would be required to include 1/3 of the FHSA FMV in their income; whereas, if under the provincial law, the individual’s estate was the beneficiary (for example, because the individual had not designated any individual beneficiary under the FHSA), the income inclusion resulting from s. 146.6(17)(c) would be to the estate.

Neal Armstrong. Summary of 7 May 2024 CALU Roundtable, Q.2, 2024-1005791C6 under s. 146.6(17)(c).