23 October 1990 Internal T.I. 9030067 F - Clearance Certificates

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.

SUBJECT:  Clearance Certificates Subsection 159(2)

Your memorandum of October 23, 1990 addressed to the Audit Applications Division has been referred to this office for reply.

Your memorandum concerns the situation where an individual who is a beneficiary of an estate is also, in respect of that estate, a "responsible representative" within the meaning given to that term in subsection 159(2) of the Income Tax Act (the "Act"). In this situation, it is our view that a clearance certificate issued pursuant to subsection 159(2) of the Act applies only to the individual's liability that arises in his capacity as responsible representative; i.e., the liability referred to in subsection 159(3) of the Act. Thus, where a clearance certificate has been issued and the estate's return is subsequently reassessed to reflect a greater tax liability, any judgment requiring the beneficiaries to pay the additional tax is in our view equally applicable to the individual in his capacity as beneficiary. Any other result would be unreasonable in our view given that such judgment would normally be against those who received property from the estate, one of whom would be the responsible representative in his capacity as beneficiary.

In your memorandum, you referred to two cases; i.e, Boger (89 DTC 15) and Bougie (90 DTC 6387), which suggest to you that where an individual is both a responsible representative and a beneficiary, a clearance certificate issued to the individual in his capacity as responsible representative would apply also to the individual in his capacity as beneficiary. These two cases do not suggest the same thing to us. Rather, they suggest to us that the courts support our view as set out above. In this regard, we note the following comments made in those cases:

(a)     In the Boger case at page 21:

     "The issuance of a Clearance Certificate does not preclude the Minister from going against  beneficiary to whom property was....distributed or, if property remains in the hands of the responsible representative, against the responsible representative in such capacity".

(b)     In the Bougie case at page 8 of the English copy submitted with your memorandum:

     "The purpose of the clearance certificate is only to release the executrices, as such, not the heirs".

We note your preference that a clearance certificate provide protection to the beneficiaries as well as the responsible representative, except in fraud cases. From our perspective, all we can say in this regard is that there is nothing in the Act that provides such protection to a beneficiary. Such a goal would of course be achieved if clearance certificates were issued only after all taxes owing by the deceased or the estate were paid or secured, and we understand that the practice of the Taxation Programs Branch is to make every effort to ensure that such is the case. However, as indicated by the above two cases, the possibility for "leakage" will always exist.

In view of our above comments, we have assumed that it is not necessary to specifically address points numbered 1, 2 and 3 on page 2 of your memorandum. With respect to point 4, subsection 159(2) requires that every responsible representative shall obtain a clearance certificate. 21(1)(b)    21(1)(a)

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