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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Are benefits paid out of a RRIF that is collapsed after the death of the last annuitant's death taxed in the hands of the deceased rather than in the hands of the recipient beneficiary?
Position: The fair market value of the RRIF property is included in income on the deceased annuitant's final return. The portion of the benefits subsequently paid from the RRIF that were previously included on the deceased annuitant's final return are excluded from inclusion in the income of the recipient.
Reasons: Subsection 146.3(6) and paragraph 146.3(5)(a) respectively.
XXXXXXXXXX 2002-016768
P. Kohnen
November 5, 2002
Dear XXXXXXXXXX:
Re: Payment from a RRIF after the death of the annuitant
This is in reply to your letter of September 23, 2002 requesting our comments regarding the taxation of a payment from a registered retirement income fund ("RRIF") after the death of the annuitant.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.
It is noted that the quotation referred to in your submission is from the 2002 information sheet RC4178, entitled Death of a RRIF Annuitant, from the Canada Customs and Revenue Agency website.
A beneficiary of a RRIF may be designated in the RRIF contract or in the deceased annuitant's will. Where a beneficiary, including the estate, is named in the RRIF contract, amounts paid from the RRIF after the death of the last annuitant are to be paid out to that person. Where a beneficiary is designated in the will, amounts will generally be paid to the estate and distributed by the legal representative of the deceased annuitant to the beneficiary, as designated in the will.
Where the last annuitant under a RRIF has died, the deceased annuitant is deemed by subsection 146.3(6) of the Income Tax Act (the "Act") to have received, immediately before his or her death, a benefit equal to the fair market value of the property held in the RRIF at the time of death. Although there is no payment actually made by the carrier out of the RRIF to the annuitant at that time, the value of the property in the RRIF at the time of death is included in the deceased annuitant's income for the year of death.
Where an amount held in the deceased annuitant's RRIF is subsequently paid from the RRIF, the portion of the amount that was included in computing the income of the deceased annuitant (or any other person) is excluded from the amount that the recipient is required to include in income pursuant to paragraph 146.3(5)(a) of the Act.
The deceased annuitant's estate is responsible for the income taxes owing in respect of the deceased annuitant's final income tax return. The fair market value of the RRIF which must be included in income pursuant to subsection 146.3(6) of the Act will be included on this final return. Where the estate has insufficient property to pay the taxes owing, the provisions of subsection 160.2(2) of the Act provide that the recipient of the RRIF property can be liable for the taxes of the deceased annuitant relating to the deemed RRIF benefit which is included in the deceased annuitant's income under subsection 146.3(6) of the Act. The recipient can only be liable for the deceased annuitant's taxes that relate to the amount received by the recipient.
We trust that the above comments will be of assistance to you. Please do not hesitate to contact Phillip Kohnen at 957-2093 should you require further information.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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