20 December 2000 External T.I. 2000-0056585 - TAXING OF RRSP PROCEEDS ON DEATH

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: What are the tax consequences and who is taxed when an annuitant of a matured RRSP dies

Position: Gave general positions. It is dependent on whether there is a surviving spouse.

Reasons: Based on provisions on RRSP

XXXXXXXXXX 							2000-005658
M. P. Baldwin
December 20, 2000

Dear Sir:

Re: Taxing of RRSP Proceeds Received by an Estate

This is in reply to your letter of July 7, 2000 sent to the Toronto Tax Services Office and received in our office on November 14, 2000 and our phone calls (XXXXXXXXXX/Baldwin) in which you request information on how an amount received from RRSP Annuity Guaranteed Funds on the death of the annuitant and the joint annuitant is treated for tax purposes.

As noted in the Information Sheet entitled "Death of an RRSP Annuitant" (enclosed), a matured RRSP is an RRSP that is paying a retirement income. When the annuitant of a matured RRSP dies, the annuitant is considered to have received, immediately before death, an amount equal to the fair market value ("FMV") of all remaining annuity payments under the RRSP at the time of death. This amount and all others the annuitant received in the year from the RRSP have to be reported on the annuitant's return for the year of death.

However, if in the RRSP contract the deceased annuitant named his or her spouse as the sole beneficiary of the RRSP, the annuitant is not considered to have received an amount from the RRSP at the time of death. In this situation, the RRSP continues and the spouse becomes the successor annuitant under the plan. All annuity payments made after the date the annuitant dies become payable to the spouse. A T4RSP slip will be issued to the spouse for the year of death and in future years for the annuity payments he or she received. The spouse has to report in income the annuity payments he or she has received for the year they are received.

As noted above and in paragraph 5 of Interpretation Bulletin IT-500R, RRSP'S - Death of an Annuitant (enclosed), when the successor annuitant dies, he is considered to have received, immediately before death, an amount equal to the FMV of all remaining annuity payments under the RRSP at the time of death. This amount and all other amounts received by him in the year from the RRSP are to be reported on his return for the year of death.

However, as noted in paragraph 14 to 16 of IT-500R, "Where an annuitant dies, subsection 160.2(1) provides that the recipient (including the estate of the deceased) of a tax-free amount out of or under an RRSP (see 12 above) is jointly and severally liable with the deceased annuitant for a portion of the deceased's additional tax payable that arose because the amount was included in the deceased's income under subsection 146(8.8). This joint and several liability is equal to the proportion of such additional tax to the deceased that the recipient's tax-free share of the RRSP amount is of the total of the RRSP amounts included in the deceased's income for the year of death under subsection 146(8.8)."

Although we trust our comments are of assistance to you, we would advise that they do not constitute an advance income tax ruling and are, therefore, not binding on the Agency with respect to any particular situation.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate

c.c. Toronto Centre Tax Services Office

Eric Range