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.
Whether beneficiary of estate of deceased can report (proposed) 56(1)(a.1) income.
56(1)(a.1) requires estate to bring into income; 104(6) permits estate a deduction if payable to beneficiary in year; 104(13) requires beneficiary to include in income if estate takes 104(6) deduction.
XXXXXXXXXX P. Spice
January 28, 1998
Re: Reporting of CPP/QPP Death Benefits
This is in reply to your letter of December 1, 1997, in which you refer to the commentary in the 1997 General Income Tax Guide for line 114 concerning a death benefit reported in box 18 of the T4A(P) slip. You also refer to the proposed amendment contained in Bill C-28 which will add paragraph 56(1)(a.1) to the Income Tax Act (the "Act") to require the estate of a deceased person to report in income the amount of a death benefit received under section 71 of the Canada Pension Plan ("CPP"). The same reporting requirement will be added for estates that receive such amounts under a similar provision of a provincial pension plan as identified in section 3 of the CPP. The amendment will be effective for an amount of such a death benefit received after July 31, 1997. Note that Bill C-28 also contains an amendment adding clause 56(1)(a)(i)(F) which excludes from a taxpayer's income any amount of a CPP or similar provincial plan death benefit received by that taxpayer. The effect of the two amendments is that only a recipient of such a death benefit which is also the estate of the deceased individual is required to report the amount in income.
You ask why the above-noted Guide states that the beneficiary of the estate can choose to report such a CPP benefit on the estate's return or on the individual beneficiary's return.
Sections 104 through 108 of the Act contain special rules with respect to the calculation of a trust's and its beneficiary's incomes. In basic terms, subsection 104(6) of the Act permits a trust a deduction from income of an amount that becomes payable to a beneficiary in the year. Subsection 104(13) of the Act requires the beneficiary of the trust to include in income the amount that would have been income to the trust but was deducted from the trust's income under subsection 104(6) of the Act. Thus, a choice may be made to include the death benefit in either the trust's or the beneficiary's income.
The foregoing comments are general in nature and are not applicable in all situations with respect to the flow-through of income by a trust to its beneficiary. However, we trust they explain the basis for the commentary for Line 114 which you questioned. To summarize, the interaction of the aforementioned amendments to subsection 56(1) of the Act as announced in Bill C-28 and section 104 of the Act will permit either the estate of the deceased or the beneficiary of the estate (if the amount is payable to such beneficiary) to include the death benefit in income. The proposed amendment will also exempt from income tax a recipient of such a death benefit if the recipient is neither the estate of the deceased nor a beneficiary of such an estate.
Financial Industries Division
Income Tax Rulings &
Policy & Legislation Branch
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