27 October 1994 External T.I. 9424045 - TAXATION OF RRIF AMOUNTS AFTER DEATH

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.

Principal Issues:

Who is taxed on death of annuitant of a RRIF (insurance contract) and 60(L) annuity where beneficiaries are nieces and sister.

Position TAKEN:

The deceased or, in the case of the life annuity and an election under 70(2), the deceased in a separate return for "rights or things".

Reasons FOR POSITION TAKEN:

Routine.

XXXXXXXXXX 942404

October 27, 1994

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

This is in reply to your letter of September 12, 1994, which was forwarded to us for reply. You ask for a ruling as to whether the above-named deceased taxpayer, his estate, or the recipients of the property in the deceased's registered retirement income fund (RRIF) and life annuity are liable to pay taxes on the value of the RRIF and life annuity.

The Department can only provide a ruling with respect to a proposed transaction. As the events underlying your query have been completed we are unable to rule on the tax consequences. We can, however, provide the following general comments for your assistance, although they are not binding on the Department.

Subsection 146.3(6) of the Income Tax Act (the "Act") deems the annuitant to have received an amount out of the RRIF equal to the fair market value of the property at the time of the death. The deceased annuitant is then taxable on this amount in accordance with subsection 146.3(5) and paragraph 56(1)(t) of the Act. Where, as in the situation described by you, the recipients of the RRIF property are two nieces and a sister of the deceased RRIF annuitant, there is no deferral of tax or roll-over available. No tax is payable by the estate or the beneficiaries as a consequence of the payment of the amounts by the insurance company to the beneficiaries.

Subsection 70(2) of the Act requires that the fair market value of the life annuity be included in the deceased's income for the year of death unless an election is made by the deceased's legal representative in accordance with that subsection to file a separate return on which the value of the life annuity (and the values of other "rights or things" if any) is reported and taxed separately. For more information concerning this separate return please refer to Chapter 3 of the enclosed Guide for Preparing Returns for Deceased Persons. No tax is payable by the estate or the beneficiaries on the value of the life annuity as a consequence of the death or the payment by the insurance company of the amounts to the beneficiaries.

We trust this information is helpful.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch