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: IC82-6R2 lays out a procedure for the representative of an estate to follow in order to obtain a clearance certificate to enable the estate's property to be distributed. The estate is considered to be terminated on the rep's chosen date notwithstanding that the actual termination date will occur later. The rep is regarded as holding the estate's property on behalf of the beneficiaries after the chosen date. The question arises as to when the beneficiaries should report any income earned after that date. E.g. not until received?
Position: The beneficiaries should report income to the same extent they would if they held the property directly.
Reasons: If the estate is considered to be wound up on the chosen date, the rep thereafter merely holds the property as agent for the beneficiaries pending receipt of a ss.159(2) clearance certificate.
2000-001964
XXXXXXXXXX J.D. Brooks
(613) 957-2103
Attention: XXXXXXXXXX
July 4, 2000
Dear Sirs:
This is in reply to your two letters of March 16, 2000 addressed to the Toronto Tax Services Office: one addressed to Client Assistance Area and one to Kristi Given. You presented a situation in which an estate, in anticipation of winding up, has followed the procedures outlined in Information Circular 82-6R2, Clearance Certificate, to request a clearance certificate as provided by subsection 159(2) of the Income Tax Act. Having made a distribution of property from the estate to its beneficiaries, the estate representative held back some of the estate's property pending receipt of a clearance certificate. You are aware that it is the Canada Customs and Revenue Agency's (CCRA) view that the property that the representative continues to hold is regarded as being held on behalf of the beneficiaries. However, you are uncertain as to when the beneficiaries should report income earned on the property.
The situation outlined in your letter appears to relate to an actual situation. While we are unable to comment on the particular situation described in your letter, the following general comments may be of assistance to you.
Information Circular 82-6R2 lays out the procedure to request a clearance certificate. The procedure is designed to overcome the pragmatic problem of the CCRA not being able to confirm, coincidentally with the windup of an estate, that all taxes have been paid. Accordingly, the procedure requires the representative to file and have the estate assessed on the basis of a chosen date for the estate's termination, after which time a certificate may be requested. Upon receiving the certificate, the representative is to release any properties being held on behalf of the beneficiaries, and the chosen date of the estate's windup will be considered to be the actual date of distribution of the estate's assets. For the interim between the chosen date and the actual date of distribution, the representative is considered to hold the property on behalf of the beneficiaries. Thus, it is our view that normally the beneficiaries should report any income on such property to the same extent they would report such income if they held the property directly.
The comments above represent an expression of opinion which, as indicated in paragraph 22 of Information Circular 70-6R3, is not an advance income tax ruling and, accordingly, is not binding on the CCRA.
We trust that these comments will be of assistance to you.
Yours truly,
T. Murphy
Manager
Trusts Section
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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