31 May 1999 External T.I. 9907245 - T2019, ELECTION REQUIREMENTS

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:

Do both the deceased’s legal representative and the spouse, child or grandchild have to sign the T2019 election? Is an election required to receive refund of premiums treatment if the amount is not otherwise a refund of premiums?

Position:

Yes for both.

Reasons:

The prescribed form (required by subsection 146(8.1)) requires the two parties to sign the election. If no election is made, the benefit will be taxed in the hands of the annuitant as no provision allows for alternative treatment.

XXXXXXXXXX 990724
M. P. Sarazin
Attention: XXXXXXXXXX

May 31, 1999

Dear Sirs:

Re: T2019 Election

This is in reply to your letter dated March 18, 1999, wherein you requested general information regarding the joint election that can be made under subsection 146(8.1) of the Income Tax Act (the “Act”), by completing and filing a T2019 (Death of an RRSP Annuitant - Refund of Premiums), to have an amount treated as a “refund of premiums”, within the meaning assigned by subsection 146(1) of the Act. The context of your query is where an amount is not otherwise a refund of premiums.

Comments

The enclosed Interpretation Bulletin IT-500R, Registered Retirement Savings Plans - Death of an Annuitant, discusses the income tax treatment of payments out of an RRSP made on or after the death of the annuitant, including the relevance of the receipt of a refund of premiums and the election available to deem an amount to be a refund of premiums.

The purpose of the election is to reduce, within the limits provided under subsection 146(8.9) of the Act, the amount that is deemed to have been received by the deceased annuitant immediately before his or her death under subsection 146(8.8) of the Act. We also note that the designated amount under the election will be deemed to be received by the spouse, child or grandchild, as the case may be, and will included in that person’s income for that year.

Paragraph 10 of IT-500R deals specifically with the “Reduction of benefit at death - Designated refund of premiums”. It states that where an amount is paid from an unmatured RRSP of a deceased annuitant to the annuitant’s legal representative, the annuitant’s spouse can, if the spouse is the beneficiary of the annuitant’s estate (though not necessarily of the RRSP benefit), elect jointly with the legal representative under subsection 146(8.1) of the Act to include in the spouse’s income such portion of the payment designated as a refund of premiums. It also states that, if the deceased annuitant of an RRSP (whether matured or unmatured) had no spouse at death, a financially dependent child or grandchild of the annuitant who is a beneficiary of the annuitant’s estate can make a similar election.

Where a spouse, child or grandchild is entitled to make the election to designate an amount as a refund of premiums, the T2019 election has to be made jointly by the deceased annuitant's legal representative and the spouse, child or grandchild, as the case may be. The legislative authority for this is found in subsection 146(8.1) which requires the election to be made in prescribed form. The prescribed form, T2019, requires the legal representative and the relevant beneficiary to both sign the form as evidence of a joint designation. If the prescribed form is not completed as required, the taxpayers will not be able to avail themselves to the provisions found in subsection 146(8.1).

These comments would also be generally applicable to Form T1090 regarding the transfer of a designated benefit from a Registered Retirement Income Fund.

We trust these comments will be of assistance.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch