15 January 2010 External T.I. 2009-0318581E5 - Utilization of non-capital losses

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. Can non-capital losses incurred in the 2001 taxation year be carried forward and utilized in the 2009 taxation year?

2. Is the beneficiary of a RRIF subject to tax on receipt of the proceeds of the RRIF following the death of the annuitant?

Position: 1. No.

2. Generally no, subject to certain exceptions.

Reasons: 1. Paragraph 111(1)(b) of the Act. Non-capital losses arising in a taxation year ending before March 23, 2004 may only be carried forward for seven taxation years (i.e., in this case, to the 2008 taxation year).

2. Very general information provided by taxpayer so only general advice may be provided. Refer to RC-4178.

								2009-031858
XXXXXXXXXX 							Renee Sigouin
(613) 957-2128
January 15, 2010

Dear XXXXXXXXXX :

Re: Non-capital losses

We are writing in response to your letter of April 14, 2009 wherein you asked whether non-capital losses incurred by you in the 2001 taxation year could be carried forward and utilized in the 2009 taxation year. We understand that you would like to utilize these losses to offset any potential income tax liability arising on your receipt of proceeds of a Registered Retirement Income Fund ("RRIF") of which you were a beneficiary. We apologize for the delay in our response, however, we have to date been unable to contact you by telephone at the number that you provided.

The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. 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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Pursuant to paragraph 111(1)(a) of the Income Tax Act (the "Act"), non-capital losses arising in a taxation year ending before March 23, 2004 may be carried forward for seven taxation years or carried back for three taxation years. Accordingly, non-capital losses incurred by you in the 2001 taxation year may only be carried forward and utilized up to and including the 2008 taxation year. Please note that the provisions relating to the carry-back and carry-forward of non-capital losses were amended as a result of the 2004 and 2006 Federal Budgets such that non-capital losses arising in taxation years ending between March 23, 2004 and December 31, 2005 may be carried forward for 10 years and non-capital losses arising in taxation years ending after this time may now be carried forward for 20 taxation years.

We understand that you were a beneficiary of a RRIF formerly held by your mother, who was the RRIF annuitant. You have advised that your mother passed away and that you have received proceeds from her RRIF in 2009 that you believe will be taxable to you in the 2009 taxation year. As you have not provided any specific details with respect to these matters, we have provided below some general information for your reference.

The CRA provides a general explanation of the tax consequences arising on the death of a RRIF annuitant in CRA Guide RC 4178: Death of a RRIF Annuitant (the "Guide"), a copy of which is enclosed for your information. As explained on page 1 of the Guide, when the annuitant of a RRIF dies, we consider that the annuitant received, immediately before death, an amount equal to the fair market value of all of the property held in the RRIF at the time of death. This amount, and all other amounts the annuitant received from the RRIF during the year have to be reported on the annuitant's return for the year of death. Generally speaking, a beneficiary, such as yourself, will not have to pay tax on any payment made out of the RRIF if it can reasonably be regarded as having been included in the deceased annuitant's income. Certain limited exceptions to this rule are explained on page 1 and 2 of the Guide.

As stated on page 2 of the Guide, you should also note however that "amounts paid from the RRIF, which represent income earned in the RRIF after the date the annuitant dies, have to be reported by the beneficiaries named in the RRIF contract or the annuitant's estate (if no beneficiary is named). These payments have to be included in the income of the beneficiaries or the estate for the year they are received."

We trust that these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch