Income Tax Severed Letters - 2019-12-18

Conference

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 2, 2019-0811881C6 F - HBP/HBTC - Death of a spouse

Unedited CRA Tags
146.01(1) and 118.05(1)
Summary Under
Tax Topics - Income Tax Act - Section 146.01 - Subsection 146.01(1) - Regular Eligible Amount - Paragraph (f)
widow who had resided in the home of her deceased husband could access the HBP program to purchase a condo or acquire his home from estate
Summary Under
Tax Topics - Income Tax Act - Section 118.05 - Subsection 118.05(1) - Qualifying Home - Paragraph (a)
widow who had resided in the home of her deceased husband could access the first-time home buyer’s credit

Principales Questions: In a situation where during her marriage, a spouse inhabited a home wholly owned by her husband, what would be the CRA position:
1. If she buys a home shortly after her husband’s death and she doesn’t have another spouse or a common-law partner:
a. Would she meet the condition in paragraph f) of the definition “regular eligible amount” in subsection 146.01(1)?
b. Would she meet the condition in subparagraph (a)(iii) of the definition “qualifying home” in subsection 118.05(1)?
2. If she acquires the home from the estate by inheritance, would she be eligible for the HBP?

Position Adoptée: 1. a. Paragraph f) of the definition “regular eligible amount” in subsection 146.01(1) would have no application if the withdrawal is made after the death.
1. b. Subparagraph (a)(iii) of the definition “qualifying home” in subsection 118.05(1) would have no application if the acquisition of the home is made after the death.
2. Question of fact.

Raisons: 1. Previous positions and according to the ITA.
2. Previous position regarding the broad meaning of "written agreement" for purposes of the HBP and other requirements of the definition “regular eligible amount” in subsection 146.01(1).

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 4, 2019-0813421C6 F - TFSA - Survivor Payment - Decrease in FMV

Unedited CRA Tags
207.01(1)
Summary Under
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Exempt Contribution - Paragraph (b)
survivor payment equals amounts paid under the TFSA to the estate provided the survivor receives at least that amount as TFSA beneficiary
Summary Under
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Unused TFSA Contribution Room - Paragraph (b) - Element D
diminution in TFSA property in executors' hands reduces exempt contribution

Principales Questions: What is the amount of the survivor payment in various scenarios where the FMV of the property held by a TFSA decreases after the death of its last holder and the survivor is a beneficiary of the last holder's estate under his will?

Position Adoptée: The amount of the survivor payment depends on the amount paid out of or under the TFSA to the last holder's estate, and on the amount received by the survivor from the estate in accordance with the last holder's will. Where the survivor is entitled to the whole TFSA under the terms of the last holder's will, the amount of the survivor payment will be equal to the amount of the payment made to the last holder's estate out of or under the TFSA, provided the survivor receives an amount at least equal thereto from the estate.

Raisons: Textual, contextual and purposive interpretation of the definition of "survivor payment" in paragraph (b) of the definition of "exempt contribution" in subsection 207.01(1).

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 5, 2019-0820901C6 F - TFSA Exempt Contribution - Timing of contribution

Unedited CRA Tags
207.01
Summary Under
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Exempt Contribution - Paragraph (c)
an exempt contribution to a TFSA can only be made as of right no more than 30 days before the survivor payment was received from an estate

Principales Questions: Whether a contribution may be an exempt contribution within the meaning of subsection 207.01(1) if it is made prior to the receipt, by the survivor, of a survivor payment, and a survivor payment is received later by the survivor, within the rollover period?

Position Adoptée: Yes, to the extent that the contribution does not exceed the limit determined under paragraph (d) of the definition of "exempt contribution" in subsection 207.01(1) and only if the survivor designates the contribution in prescribed form filed after the receipt of the survivor payment and within the delay provided for in paragraph (c) of the same definition - which may require exercise of ministerial discretion to extend the 30 days delay.

Raisons: Wording of the definition of "exempt contribution".

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 6, 2019-0813451C6 F - TFSA - Bequest and disclaimer

Unedited CRA Tags
207.01(1), 248(8), 248(9)
Summary Under
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Exempt Contribution - Paragraph (b)
transfer of TFSA to surviving spouse because of daughter’s renunciation occurred as a consequence of the deceased’s death
Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(b)
transfer of TFSA to survivor on renunciation of bequest thereof occurred as a consequence of death

Principales Questions: Where, under the will of a deceased TFSA annuitant, the property held in the TFSA is bequeathed to a person other than the spouse, and such person executes a disclaimer with respect to the bequest, such that, under the terms of the will, the property held in the TFSA becomes part of the residue and devolves to the spouse, will the spouse be considered to receive the property as a consequence of the death of the TFSA annuitant?

Position Adoptée: Yes.

Raisons: Subsections 248(8) and (9).

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 7, 2019-0821701C6 F - TFSA Exempt Contribution - Survivor payment

Unedited CRA Tags
207.01
Summary Under
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Exempt Contribution - Paragraph (b)
extension of rollover deadline through Ministerial discretion

Principales Questions: Whether a payment made to a survivor directly or indirectly out of or under a former TFSA after December 31 of the year beginning after the deceased TFSA holder's death may qualify as a survivor payment?

Position Adoptée: Yes, if ministerial discretion is exercised to extend the rollover period. In such a case, the extended rollover period will be the rollover period for the purposes of paragraph (a) of the definition of “exempt contribution” in subsection 207.01(1), as well as for the purposes of paragraph (b) of the same definition.

Raisons: Definition of "rollover period" in paragraph (a) of the definition of "exempt contribution" and legislative intent as expressed in the April 2008 explanatory notes to former subsection 207.01(2).

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 8, 2019-0811901C6 F - RRIF – Minimum amount after death

Unedited CRA Tags
60(l), 146.3(1), (5) et (6.11)
Summary Under
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(6.11)
deduction of RRIF minimum amount in post-terminal year of transfer out of deceased's RRIF to surviving spouse
Summary Under
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(1) - Minimum Amount
required recognition of RRIF minimum amount in post-terminal year of transfer of RRIF to surviving spouse

Principal Issues: (a) In order to calculate the minimum amount under a RRIF for a taxation year following the death of the last annuitant of the RRIF, do we use the age that the deceased annuitant had at the beginning of the year of his death, the age that the deceased would have attained at the beginning of the year following the year of his death or the age of the surviving spouse or common-law partner at the beginning of the year that the designated benefit was received?
(b) In the situation where the minimum amount under the RRIF for the year of the annuitant’s death has not been paid and the designated benefit is paid in a subsequent year, is it correct, for the purposes of calculating the eligible amount according to subsection 146.3(6.11), that only the minimum amount for the year in which the surviving spouse has received the designated benefit will be deducted?

Position: (a) Unless at the time the RRIF was set up the annuitant elected to use the spouse or common-law partner’s age, the minimum amount will be determined according to the age that the deceased annuitant would have attained at the beginning of the year that the designated benefit is received.
(b) Yes.

Reasons: (a) The "minimum amount" as defined in subsection 146.3(1) is calculated as the total fair market value of all properties held in connection with the RRIF at the beginning of the year multiplied by the prescribed factor corresponding to the age of the annuitant or where the annuitant so elected, the annuitant spouse or common-law partner. The prescribed factor for the year is the factor listed in paragraphs 7308(3) or (4) of the Regulations, which corresponds to the age in whole years that the individual attained at the beginning of that year or that would have been so attained by the individual if he had been alive at the beginning of the year that the designated benefit was received.
(b) The eligible amount according to subsection 146.3(6.11) is calculated by excluding the portion of the minimum amount under the RRIF for the year in which the surviving spouse has received the designated benefit pursuant to subsection 146.3(5). Where the annuitant has died in a previous year, the amount that may be transferred must be reduced by the minimum amount as calculated for the year in which the surviving spouse has received the designated benefit.

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 9, 2019-0813281C6 F - Pension splitting - RRIF deemed benefit

Unedited CRA Tags
56(1)(h), (t), 60.03, 118(7), 146(5), (8), (8.2), (8.8) and 146.3(6)
Summary Under
Tax Topics - Income Tax Act - Section 118 - Subsection 118(7) - Pension Income - Paragraph (a) - Subparagraph (a)(iii)
deemed payment on death of last RRIF annuitant is not pension income
Summary Under
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(6)
s. 166.3(6) language does not go on to deem there to be payment by RRIF issuer

Principales Questions: Whether an amount deemed received out of or under a RRIF constitutes a "payment out of or under a RRIF" for the purposes of the definition of "pension income" in subsection 118(7)?

Position Adoptée: No. For an amount to be considered "as a payment out of or under a RRIF" for the purposes of the definition of "pension income" in subsection 118(7), a payment shall arise from the performance of an agreement between the RRIF carrier and the annuitant and delivered in satisfaction of an obligation. An amount deemed to be received under subsection 146.3(6) is not in fact a "payment out of or under a RRIF" because no payment is made by the RRIF carrier and no payment is actually received by the last annuitant under the RRIF.

Raisons: Prior positions.

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 10, 2019-0812841C6 F - RESP - Change of subscriber

Unedited CRA Tags
146.1(1), 146.1(2), 146.1(6.1) and 204.9(5)
Summary Under
Tax Topics - Income Tax Act - Section 146.1 - Subsection 146.1(6.1)
amounts can be transferred from one RESP to another
Summary Under
Tax Topics - Income Tax Act - Section 204.9 - Subsection 204.9(5) - Paragraph 204.9(5)(e)
RESP transferor could be liable under s. 204.91(1)

Principales Questions: Can the CRA confirm that it is possible to indirectly change subscribers through a transfer between two RESPs having the same beneficiary?

Position Adoptée: Yes, provided the arrangement entered into with the promoter allows it.

Raisons: The RESP rules allow transfers from one RESP to another. However, subsection 146.1(6.1) provides special rules for such transfers. In addition, in a situation where both RESPs have the same beneficiary, subsection 204.9(5) ensures that the transfer will not, in and of itself, result in Part X.4 tax consequences.

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 11, 2019-0812971C6 F

Unedited CRA Tags
250(1); 250(3)
Summary Under
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1)
CRA uses information collected on an NR73 as its principal tool in assessing individuals’ residency

Principales Questions: Whether CRA could introduce a simplified procedure to determine the residency status of individuals physically absent from Canada for a long period of time.

Position Adoptée: No.

Raisons: The question of whether an individual is resident of Canada is a question of fact that can only be resolved after a detailed analysis of all of the relevant facts and circumstances in each case, including residential ties with Canada and length of time, object, intention and continuity with respect to stays in Canada and abroad.

11 October 2019 APFF Financial Strategies and Instruments Roundtable Q. 12, 2019-0815181C6 F - RRSP on death and refund of premiums

Unedited CRA Tags
56(1)(h), 56(1)(t), 60(l), 146(8), (8.1), 146.3(1), (5), (6.1), (6.11)
Summary Under
Tax Topics - Income Tax Act - Section 146 - Subsection 146(8.1)
post-death appreciation in an RRSP could qualify for a s. 146(8.1) rollover
Summary Under
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(6.1)
rollover of post-death RRIF income under s. 146.3(6.1)

Principales Questions: (1) Whether the increase in the FMV of all the property of an unmatured RRSP which accumulated after the date of death of the annuitant and designated as a refund of premiums under subsection 146(8.1) must be reported in the Estate T3 return and whether a T3 slip in respect of this amount must be filed? (2) Whether the result would be the same in the case of a designation pursuant to paragraph (a) of the definition of designated benefit in subsection 146.3(1) that result in the application of subsection 143.3(6.1)?

Position Adoptée: (1) No. (2) Yes.

Raisons: (1)When an amount is designated pursuant to subsection 146(8.1), the amount so designated is deemed to be received by the individual and not by the legal representative at the time it was paid to the legal representative. Accordingly, the increase in the FMV of the RRSP property after the death that is a refund of premium pursuant to subsection 146(8.1) would not have to be included in the Estate’s income. Where at the time of filing the Estate’s T3 return, the election under subsection 146(8.1) has been made, the increase in the FMV of the RRSP property after the date of death would not have to be reported in the Estate’s T3 return. (2) The rules applicable to the RRIF are similar to the RRSP rules.