17 January 1996 Internal T.I. 9531046 - TRANSFER TO SPOUSE OF AGE AMOUNT

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:

	whether surviving spouse may transfer age amount from 	70(2) return

Position:

no

Reasons:

	the statutory requirement that the 70(2) return be filed 	as if the deceased t/p were "another person" means, in 	our view, that the "other person" is not considered the 	"individual's spouse" as referred to in 118.8

		January 17, 1996

	Individual Returns and Payments	HEADQUARTERS
	  Processing Directorate	Sandra Short
	Processing Division	(613) 957-8953
J. M. Legault, Director
		953104

Subsection 70(2) and Section 118.8 Transfer to Spouse

This is in reply to your memorandum of November 24, 1995 concerning a transfer of the age amount (subsection 118(2) of the Act) to a surviving spouse's return pursuant to section 118.8. Your enquiry relates to a situation where a portion of the income of a deceased person has been reported on a "rights or things" return pursuant to subsection 70(2) of the Act. The entire amount of the age amount claimed on the final T1 return was used against tax payable. The 70(2) return contains only a nominal amount of interest income and thus the age amount is not needed as there is no federal income tax payable. The executor would like to allow the surviving spouse to transfer the age amount available on the 70(2) return to himself/herself. You have queried whether such transfer is permissible.

You have expressed concern that such transfer may be allowed. The deceased client is entitled to claim the age amount on both the T1 return for the year of death and the 70(2) return and nothing in section 118.93 prohibits this. Section 118.8 indicates that a client may claim any 118(2) amount not required to reduce the spouse's tax payable to nil. As there is no tax payable on the 70(2) return, you conclude that the surviving spouse may claim the age amount not needed on the 70(2) return. You have considered subsection 4(4) of the Act but have concluded that because the surviving spouse is only transferring one age amount that this section is of no assistance. Thus, it would appear that the surviving spouse may be able to benefit from an amount which is only made available because of the election by a legal representative to file more than one return.

Our Comments

We believe that the surviving widow/er cannot transfer the age amount from the subsection 70(2) return. Our reasoning follows:

The election by a legal representative to report the value of rights or things on a separate return pursuant to subsection 70(2) requires that the separate return of income be filed as if

(a)the taxpayer were another person;

(b)that other person's only income for the year were the value of the rights or things; and

(c)subject to sections 114.2 and 118.93, that other person were entitled to the deductions to which the taxpayer was entitled under section 110, 118 to 118.7 and 118.9 for the year in computing the taxpayer's taxable income or tax payable under this Part, as the case may be, for the year.

The statutory requirement that the 70(2) return be filed as if the deceased taxpayer were "another person" means, in our view, that the "other person" is not considered the "individual's spouse" as referred to in section 118.8 of the Act. That is to say that the legislation is clear that the elective returns which may be filed are to be filed not as multiple returns of the same taxpayer but as if they were separate returns by separate individuals who share or possess some of the same characteristics as the deceased taxpayer immediately prior to death. This is evidenced not only by the reference to "another person" but also by the fact that this "other person" is statutorily permitted deductions which are permitted to the deceased taxpayer under sections 110, 118 to 118.7 and 118.9 of the Act, subject to sections 114.2 and 118.93.

In addition to subsection 70(2), paragraph 104(23)(d) and subsection 150(4) also provide for alternative treatment of income. Each of these provisions contain wording to the effect that the value of rights or things (70(2)), income from a trust (104(23)(d)) or, income as a partner or proprietor (150(4)) "at the time of death shall be included in computing the taxpayer's income for the taxation year in which the taxpayer died, unless the taxpayer's legal representative ...elected otherwise". It follows therefore, that if the legal representative so elects, the amount involved is not to be included in the income of the deceased for the taxation year. The income of the individual who is the deceased spouse of the surviving widow or widower is made up entirely of that income which is reported on the final T1 return only. Any income which is included on one of the elective returns or any credits claimed on the elective returns are treated as though they are income or credits of "another person".

Bryan W. Dath
Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch