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: Will a disabled adult child be considered financially dependent for purposes of the definition of "refund of premiums" in subsection 146(1) of the Act?
Position: Question of fact.
Reasons: If the daughter's income is less than $500 plus her basic personal exemption in the year immediately preceding her parent's death, we will consider her financially dependent at that time.
XXXXXXXXXX 2000-003986
M.P. Sarazin
August 30, 2000
Dear Sir\Madam:
Re: Financially Dependent Disable Adult Child
This is in response to your facsimile of July 28, 2000, wherein you requested a ruling that your disabled adult daughter would be considered financially dependent for purposes of the definition of "refund of premiums" in subsection 146(1) of the Income Tax Act (the "Act").
The daughter currently receives a basic Ontario MCSS disability pension of $7,896 per year, a special disability allowance of $600 per year and a reimbursement of incontinence supply expenses of $1,248 per year.
The Agency's general views regarding the treatment of payments out of an RRSP on or after the death of its annuitant are found in Interpretation Bulletin IT-500R (Registered Retirement Savings Plans - Death of an Annuitant) . We note that paragraphs 9 and 17 to 26 of IT-500R deal specifically with refunds of premiums and paragraphs 27 and 28 of IT-500R deal with the rollover provisions related thereto.
When the annuitant under an RRSP dies, subsection 146(8.8) of the Income Tax Act (the "Act") deems the annuitant to have received, immediately before death, a benefit equal to the fair market value of the property held in the RRSP at that time (IT-500R paragraph 5). Under proposed legislation, for deaths occurring after 1998, the amount included in the deceased annuitant's income as a result of his or her death may be reduced by the amount of a "refund of premiums" paid to the deceased annuitant's financially dependent child or grandchild even where the deceased annuitant had a spouse at the time of his or her death. (IT-500R paragraph 9 - note that the proposed legislation is not reflected in the comments provided therein).
An amount paid to a child or grandchild is not a "refund of premiums" if the child or grandchild is not financially dependent on the annuitant. It is assumed unless the contrary is established that the child or grandchild is not financially dependent if his or her income for the year preceding the taxation year in which the annuitant died exceeded the total of $500 plus the basic personal amount for that preceding year (IT-500R paragraph 18, - note the $500 was added subsequent to the issuance of IT-500R and it is not reflected in the comments provided therein).
The determination of whether your daughter is financially dependent would require a review of all of the facts. If your daughter's net income on line 236 of her Income Tax and Benefit Return exceeds $500 plus the amount on line 300 of her Income Tax and Benefit Return for the year immediately preceding your death or your spouse's death, we would not consider her to be financially dependent on you or your spouse at that time unless she can establish the contrary. In such a case, she or her legal representative would have to submit a request in writing to her tax services office outlining the reasons why we should consider her financially dependent on you or your spouse at the time of your death or your spouse's death.
We trust that the above comments will be of assistance.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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