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:
a) When is refund of premiums reported in income of spouse, and when may deduction be taken?
b) How is deceased's final return prepared if transfer has not been made before 60 days following end of year of death?
Position:
a) Taxable in year amount is paid to legal representative. Deductible in that same year if transferred to spouse's RRSP by 60 days following end of year of receipt.
b) Amount is reported on deceased's final return unless valid 146(8.1) designation is made by the time the final return is filed. Final return may be amended where valid designation is made after the final return is filed.
Reasons: Wording of subsections 146(8.1), 146(8.9), and 60(l) of the Act.
XXXXXXXXXX 2000-000998
S. E. Thomson
Attention: XXXXXXXXXX
April 11, 2000
Dear XXXXXXXXXX:
Re: Refund of Premiums and Transfer to Spouse's RRSP
This is in reply to your letter of February 23, 2000 in which you outline a situation where a designation is made under 146(8.1) of the Income Tax Act (the "Act") but an amount is not received by the legal representative, nor transferred to the spouse's registered retirement savings plan ("RRSP") within 60 days of the end of the calendar year of death. You ask in what year the refund of premiums is taxable to the spouse, and by what date should the spouse make the transfer to her RRSP. You also ask how the deceased's T1 return should be prepared.
Although you have asked for our technical interpretation on a hypothetical situation, it appears that your request involves a transaction or series of transactions contemplated by a specific taxpayer. The Canada Customs and Revenue Agency (the "CCRA") does not provide written comments on specific proposed transactions other than in reply to advance ruling requests submitted in the manner set out in Information Circular 70-6R3 Advance Income Tax Rulings, available at www.ccra-adrc.gc.ca. However, we are able to offer the following general comments on the relevant provision of the Income Tax Act (the "Act"), which may apply. Please note that these comments are general in nature, and may or may not apply in your situation. As such, these comments are not binding on the CCRA.
A deceased annuitant must include in income an amount equal to the fair market value of all property of the RRSP at death. However, the deceased annuitant is not considered to have received an amount from the RRSP at the time of death if the spouse is named as the sole beneficiary in the RRSP contract, and the spouse transfers the property her RRSP before December 31 of the year after death. If these conditions are met, the to spouse will receive a T4RSP slip in her name in the year of the transfer, and no amount will be reported on the deceased's final return. For further information, please see Information Sheet RC4177 Death of an RRSP Annuitant.
Where the estate (not the spouse) is the named beneficiary in the RRSP contract, the proceeds of the RRSP will be paid to the legal representative of the annuitant's estate. The deceased annuitant will receive a T4RSP slip in his name, and the fair market value of the property of the RRSP must be included in his income for the year of death.
Where the spouse is the sole beneficiary of the estate, the spouse and the legal representative may jointly elect under subsection 146(8.1) of the Act to include in the spouse's income for the calendar year in which the payment is made to the legal representative, that portion of the payment designated on form T2019 Death of an Annuitant - Refund of Premiums as a refund of premiums. Where the spouse is not the sole beneficiary, it is necessary for the legal representative to determine whether the designation under subsection 146(8.1) of the Act can be made. For more information, see paragraphs 10 and 11 of IT-500R Registered Retirement Savings Plans - Death of an Annuitant, which may be viewed at the above-noted website.
Where the spouse makes a contribution to her RRSP in the year the payment is made to the legal representative, or within 60 days thereafter, a deduction is available to the spouse under paragraph 60(l) of the Act. For example, where an amount is paid to the legal representative in March 2000, the spouse will include the designated amount in her 2000 income. To be eligible for deduction under paragraph 60(l), the transfer to the spouse's RRSP must be made on or before March 1, 2001. The amount deducted cannot exceed the amount included in her income as a refund of premiums by virtue of the subsection 146(8.1) designation.
The amount included in the spouse's income by virtue of a subsection 146(8.1) election is deductible under subsection 146(8.9) of the Act from the amount that had been included in the deceased's income on his final return. As set out in the information sheet RC4177, where the subsection 146(8.1) election is made after the deceased's final return has been filed, the spouse should write a letter to the appropriate tax centre to request an adjustment to the deceased's final return. We have confirmed with the Assessments and Collections Branch of the CCRA that where a valid election under subsection 146(8.1) has been made at the time the deceased's final return is filed, the legal representative may attach a copy of form T2019 to the deceased's return, along with a letter explaining the reduction to the amount otherwise required to be reported at line 129. Questions concerning the filing of T1 returns, and adjustments thereto, should be directed to the appropriate tax centre.
We trust that the above comments are of assistance to you.
Yours truly,
P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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