This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: Where the annuitant of an unmatured RRSP dies without having withdrawn over-contributions he made to the RRSP in the preceding year, whether the deceased annuitant's legal representative may claim a subsection 146(8.2) deduction against the amount included in the deceased annuitant's income pursuant to subsections 146(8) and (8.8)?
Position: Generally, yes, provided that all the other conditions are satisfied.
Reasons: Although subsection 146(8.2) requires, inter alia, that the annuitant receives a payment from an RRSP, the CRA generally accepts that an amount deemed received as a benefit out of or under an RRSP pursuant to subsection 146(8.8) be considered as a payment received from an RRSP for the purposes of subsection 146(8.2).
Financial Strategies and Financial Instruments Roundtable, 6 October 2017
2017 APFF Conference
Subject: RRSP excess contributions and annuitant's death
An individual may, during a taxation year, contribute to the individual’s registered retirement savings plan ("RRSP") up to his or her "RRSP deduction limit" within the meaning of subsection 146(1). Where the individual contributes above this maximum, an overcontribution penalty may apply, where the contributions exceed the RRSP deduction limit for the year by $2,000. This penalty is imposed as Part X.1 tax.
An individual with excess contributions to the individual’s RRSP, may, in order to avoid the application of Part X.1 tax, withdraw the over-contributed amounts from the RRSP. The amount withdrawn will constitute, pursuant to subsection 146(8), additional income for the year of the withdrawal, even if the individual has never claimed a deduction for an RRSP contribution in computing his or her income in respect of that amount.
However, it is possible for an individual to claim an offsetting deduction under subsection 146(8.2), but there are extremely specific time limits for qualifying for this deduction.
As stated by the CRA in Technical Interpretation 2009-0344121E5 (footnote 1), to take advantage of this deduction, paragraph 146(8.2)(c) provides that the amount withdrawn must be received by the individual:
(i) in the year in which the premiums were paid by the taxpayer,
(ii) in the year in which a notice of assessment for the taxation year referred to in subparagraph (i) was sent to the taxpayer, or
(iii) in the year immediately following the year referred to in subparagraph (i) or (ii),
Questions to the CRA
(a) Assume that the individual, who over-contributed to his RRSP in 2015, died in 2016. Can the CRA confirm that the over-contributions to the deceased's RRSP (which were not deducted in computing the individual’s net income in 2015) are added to the individual’s income under subsections 146(8) and (8.8), subject to the rules in subsection 146(8.9)?
(b) In the case where the time limits set out in subsection 146(8.2) are still applicable, is it possible for the executor of the deceased's estate to complete the appropriate forms (including Form T746 (footnote 2)) after the individual's death, so that the latter can benefit from an offsetting deduction, by virtue of subsection 146(8.2), in computing his net income for the year of his death?
CRA response to Question 2(a)
Under subsection 146(8.8), where the annuitant of an RRSP dies before the maturity of the plan, the annuitant is deemed to have received, immediately before the annuitant’s death, as a benefit out of or under the RRSP, an amount equal to the fair market value ("FMV") of all the property of the RRSP at the time of death. Consequently, in the year of death, this amount must be included in computing the income of the deceased annuitant under subsection 146(8) and paragraph 56(1)(h). Subject to the rules set out under subsection 146(8.9), the amount to be included depends solely on the FMV of the RRSP property at the time of death. The fact that premiums paid to the RRSP prior to the time of death could not be deducted has no impact on the amount to be included.
CRA response to Question 2(b)
Under the conditions in subsection 146(8.2) for its application to a taxpayer in a particular taxation year (which must be one of the years referred to in paragraph 146(8.2)(c)), it is necessary in general terms that a payment from an RRSP in respect of undeducted premiums of the taxpayer, be received by the taxpayer in the year and that such payment is otherwise included in computing the taxpayer’s income for the year. If, as in the described situation, a taxpayer dies before the taxpayer has withdrawn the undeducted premiums, the taxpayer can no longer receive any payment related to these premiums. However, the CRA generally accepts that an amount deemed to be received by a deceased annuitant under subsection 146(8.8) and included in the annuitant’s income for the year of death under subsection 146(8) and paragraph 56(1)(h) should be treated as a payment received by the annuitant for the purposes of subsection 146(8.2). Thus, to the extent that all other conditions of subsection 146(8.2) are satisfied, the deduction provided under that subsection may be claimed in the deceased annuitant’s terminal return.
Respecting Form T746, it does not cover the situation where the annuitant has died. The executor of a deceased annuitant's estate who, in such circumstances, wishes to claim the deduction in the deceased annuitant’s terminal return should simply indicate the amount claimed in line 232 of the terminal return of the deceased annuitant and use the space to the left of the line to indicate that it is a deduction for the refund of unused RRSP contributions. To determine the amount of the claimed deduction, the executor could contact the CRA's Individual Income Tax Enquiries Service by telephone or obtain a worksheet [“feuille de calcul”] from the CRA by contacting the appropriate Tax Center in writing.
Response prepared by:
October 6, 2017
Response approved by:
Special assessments and supplementary examinations section
Audit and Assessments Division
Individual Compliance Directorate,
Collections and Verification Branch
(819) 573-9600 ext. 2281
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 CANADA REVENUE AGENCY, Technical Interpretation 2009-0344121E5, January 26, 2010.
2 CANADA REVENUE AGENCY, Form T746 Calculating Your Deduction for Refund of Unused RRSP, PRPP, and SPP Contributions, 2016
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