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.
Principal Issues: 1. Does 70(6) apply to property transferred to a surviving spouse under the Family Law Act of Ontario?
2. Does our response change depending on whether a court order is obtained in respect of the election?
Position: 1. Provided that the spouse is resident in Canada and receives the property within 36 months of the death of the individual (or within the period specified by the Minister of National Revenue if written application has been made within that period), yes. 2. Provided a valid election is filed with the Estate Registrar of Ontario on a timely basis, no.
Reasons: 1. Subsection 248(23.1) deems the property transferred under a FLA election to be made as a consequence of death. Provided the other conditions of 70(6) are met, subsection 70(6) will apply to the transfer. 2. Provided the surviving spouse makes a valid election under the relevant provincial family law legislation, the property acquired as a consequence of that election is deemed to be made as a consequence of the other spouse's death under 248(23.1).
XXXXXXXXXX 2006-020487
Annemarie Humenuk
Attention: XXXXXXXXXX
October 10, 2007
Dear XXXXXXXXXX:
Re: Transfer of Property under the Family Law Act of Ontario on Death
This is in reply to your letter of September 12, 2006, concerning the application of subsection 70(6) to property transferred to a surviving spouse where the surviving spouse has made an election under subsection 6(1) of the Family Law Act of Ontario ("FLA"). We apologize for the delay in our response.
You have asked us to confirm that subsection 70(6) would apply to property transferred from an estate of a deceased individual to the surviving spouse within the appropriate time period where the spouse has made a valid election under subsection 6(1) of the FLA and was resident in Canada at the time of the transfer. In particular, you ask us to consider the situation where a surviving spouse was entitled to a specific property under the terms of the deceased's will but has elected to receive the spouse's entitlement under section 5 of the FLA instead. As a result of filing the election, the executor and surviving spouse will typically come to an agreement as to which property of the estate will be transferred to the spouse in satisfaction of her entitlement under section 5 of the FLA. Court approval is only required if the parties do not agree and the spouse makes an application to the Court. The property so transferred to the surviving spouse may be property other than the property specified in the will.
Except as otherwise noted, all statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Subsection 248(23.1) provides that where property is transferred to a surviving spouse as a consequence of the laws of a province relating to spouses' and common-law partners' interests in respect of property as a result of marriage or common-law partnership, the property is deemed to have been transferred to that surviving spouse as a consequence of death. It is our understanding that a spouse has six months from the date of death to file an election with the office of the Estate Registrar for Ontario in prescribed form in order to receive his or her entitlement under the FLA rather than the will. If no election is filed within that time, the spouse will not be entitled to anything under the FLA unless so ordered by the Superior Court of Justice of Ontario ("Court"). When a surviving spouse has made an election to take his or her entitlement to benefits under the FLA rather than under a will, the will of the deceased will generally be interpreted as if the surviving spouse had died before the deceased unless the will expressly provides otherwise.
It is our understanding that the manner in which the surviving spouse's entitlement under the FLA is determined and satisfied is generally determined by agreement between the executor of the estate and the surviving spouse. The parties only need to go to Court when the parties are unable to agree on the amount and manner of the surviving spouse's entitlement under the FLA.
As a result, when a spouse who has made a valid election under subsection 6(1) of the FLA receives property from the estate in satisfaction of the spouse's entitlement under the FLA, the property will be deemed to have been transferred as a consequence of the individual's death. However, if a spouse has not made a valid election within the time specified in the FLA, any transfer of property to that spouse that is not made as a consequence of the terms of the will, other testamentary instrument or the laws of intestacy will not be considered to have been made as a consequence of death unless an order of the Court is made in respect of his or her entitlement under the FLA and includes the property so transferred. Provided that the spouse is resident in Canada and receives the property within 36 months of the death of the individual (or within the period specified by the Minister of National Revenue if written application has been made within that period), subsection 70(6) will apply to the transfer.
The fact that the capital property received by the surviving spouse is valued at fair market value in determining his or her entitlement under the FLA does not prevent the application of subsection 70(6).
The analysis would be substantially the same where the surviving spouse's entitlement to property of the deceased would otherwise be determined under Part II of the Succession Law Reform Act of Ontario or the laws of intestacy rather than under a will in the absence of an election under the FLA.
This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.
We trust our comments will be of assistance.
T. Murphy
Section Manager
for Division Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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