27 October 1995 External T.I. 9523185 - DEATH BENEFITS

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:

The allocation of the $10,000 exemption in the definition of "death benefit" in subsection 248(1) of the Act where a "surviving spouse" and other individuals receive amounts in respect of the death of an employee.

Position TAKEN:

Paragraph (a) is applicable to the surviving spouse and any remaining amount of the $10,000 exemption is allocated equally among the other individuals. Where there are two surviving spouses, the $10,000 exemption is allocated equally among all recipients.

Reasons FOR POSITION TAKEN:

						952318
XXXXXXXXXX					M. Eisner

Attention: XXXXXXXXXX

October 27, 1995

Dear Sir:

Re: Death Benefits

This is in reply to your letter of August 17, 1995 concerning the definition of "death benefit" in subsection 248(1) of the Income Tax Act (the Act).

In part, the definition of death benefit in subsection 248(1) of the Act refers to "the total of all amounts received by a taxpayer in a taxation year on or after the death of an employee in recognition of the employee's service in an office or employment". Any reference to an "amount" in our comments set out below should be construed as falling within this wording.

Paragraph (a) of the definition of "death benefit in subsection 248(1) of the Act sets out circumstances "where the taxpayer is the only person who has received such an amount and who is the surviving spouse of the employee (which person is, in this definition, referred to as the "surviving spouse")" (emphasis added). Paragraph (b) of that definition refers to the circumstances "where the taxpayer is not the surviving spouse". In relation to this wording, you are concerned with the type of situation where only one spouse receives an amount and an amount is also paid to another individual such as a son or daughter (i.e., the spouse is not the "only person who has received such an amount").

Our Comments

Paragraph (a) of the definition of death benefit in subsection 248(1) of the Act refers to a taxpayer who is the surviving spouse and who is the only person who has received such an amount. On the other hand, clause (b)(ii)(A) of the definition, which relates to the allocation of the $10,000 exemption to taxpayers other than such a surviving spouse, reduces the exemption by "the amount, if any, received by the surviving spouse ...". We interpret the description of the taxpayer in paragraph (a) of the definition to be the only surviving spouse who received an amount. Accordingly, in a situation where only one surviving spouse and other individuals receive an amount, the only surviving spouse would be entitled to an exemption of up to the full $10,000 provided under that paragraph and the other recipients could allocate among them any remaining part of the $10,000 exemption. For example, if the only surviving spouse received amounts of $7,000 and two children received amounts of $2,000 each, the surviving spouse would be entitled to an exemption of the full $7,000 and each of the two children would be entitled to an exemption of $1,500.

In a situation where two surviving spouses each received an amount, the $10,000 exemption would be allocated equally under the formula in paragraph (b) of the definition since neither of the surviving spouses is the only surviving spouse to receive an amount. If amounts are received by more than one surviving spouse as well as other individuals, the $10,000 exemption would be allocated equally among all recipients.

This interpretation is consistent with the explanatory notes issued by the Department of Finance on June 19, 1992 with respect to the changes made to the definition of "death benefit" in subsection 248(1) of the Act applicable to the 1993 and subsequent taxation years.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretation Directorate
Policy and Legislation Branch