16 June 1992 Income Tax Severed Letter 9210455 - Rights and Things - Interest Income

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

SUBJECT: RIGHTS & THINGS INTEREST INCOME SECTION: 70(1), 70(2)]

• 5- 921045 Franklyn S. Gillman
• (613) 957-8953

June 16, 1992

Dear Sirs:

Re: Subsection 70(2) of the Income Tax Act (the "Act") Rights and Things

This is in reply to your letter dated December 9, 1991 wherein you requested clarification as to the application of subsection 70(2) of the Act.

A review of the facts that you have enunciated should be the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R dated September 28, 1990. As expressed at paragraph 6 in the Information Circular, the Department will not express opinions on definite transactions that are being proposed other than by way of an advance income tax ruling, nor will the Department provide rulings on completed transactions.

While we are unable to provide confirmation of the tax effect with regards to situations such as the ones you described, we offer the following general comments for your assistance.

Since interest accrues on a daily basis (or other periodic basis), the Department considers interest to be "an amount payable periodically" for purposes of paragraph 70(1)(a) of the Act. Therefore at the date of death, interest accrued on a term deposit (or other similar investment) that becomes due and payable upon the death of the taxpayer should be reported in the deceased's income tax return pursuant to paragraph 70(1)(a) of the Act.

The Department has stated its position to this effect in paragraph 1 of Interpretation Bulletin IT-210R, where it states:

• "...For example, if a deceased taxpayer owned bonds, the value of the interest accrued from the last interest date preceding his death to the date of death would be brought into income for the year of his death by subsection 70(1);..."

However, in a situation where the taxpayer was in possession of a matured investment instrument at the date of death, any interest that was owing to the deceased immediately prior to the time of death would be considered a right or thing for purposes of subsection 70(2) of the Act to the extent the amount was not included or required to be included in the deceased's income for the year or the preceding year.

The above comments represent our opinion of the law as it applies generally. As indicated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, an opinion is not an advance ruling and accordingly, is not binding on Revenue Canada, Taxation.

We trust that our comments will be of assistance.

Yours truly,

for Director
Manufacturing Industries,
Partnerships and Trusts Division
Rulings Directorate
Legislative And Intergovernmental
Affairs Branch