13 October 1999 Internal T.I. 9926327 - COMMON LAW SPOUSE, ROLLOVER

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: Will an individual qualify as a deceased taxpayer's spouse under subsection 252(4) of the Act?

Position: Yes.

Reasons: The evidence (in a Section 58 proceeding under the Ontario Succession Law Reform Act) presented to the court by the individual (which is not contradicted in any material way by the estate) supports a conclusion that the conditions in subsection 252(4) of the Act were satisfied at the time of death.

		October 13, 1999

	TORONTO CENTRE TSO	HEADQUARTERS
	Brian Dawe	M.P. Sarazin
	Director 	(613) 824-5441

	Attention: Laura Fenton - PRP Unit
			992632

Refund of Premiums and Common Law Spouse

We are writing to you in response to your facsimile dated October 1, 1999, wherein you requested our opinion as to whether XXXXXXXXXX ("Individual") would have been considered XXXXXXXXXX ("Taxpayer") spouse for purposes of the Income Tax Act (the "Act") and whether, as a result of the Taxpayer's death, the Individual can transfer the amounts received from the Taxpayer's registered retirement savings plan ("RRSP") to her RRSP under paragraph 60(l) of the Act

Facts Presented in XXXXXXXXXX Letter Dated September 23, 1999

The Taxpayer died in XXXXXXXXXX and, as a result, his terminal tax return reflected an income inclusion of $XXXXXXXXXX which represented the fair market value of the assets in his unmatured RRSP on the date of his death. The Individual filed a claim for spousal support under section 58 of the Succession Law Reform Act (Ontario) (the "Succession Act") on XXXXXXXXXX. Counsels for the two parties met with XXXXXXXXXX of the Superior Court of Justice of Ontario on XXXXXXXXXX to determine whether the matter could be settled without the necessity of a trial which was set for XXXXXXXXXX. Handwritten Minutes of Settlement ("Minutes") were signed by counsel for both parties. Even though there is no proof, the representative claims that the handwritten Minutes were signed in front of XXXXXXXXXX. Under the terms of the Minutes, the parties agreed to the following:

(a) For purposes of the Act, the Individual was the Taxpayer's spouse at the time of his death and that she was entitled to receive the amounts held in the Taxpayer's RRSP at the date of death.

(b) The Taxpayer's estate will transfer the amounts held in the Taxpayer's RRSP to the Individual's RRSP.

(c) The Individual will receive the sum of $XXXXXXXXXX in full satisfaction of all of her claims, including costs.

(d) The Taxpayer's estate will seek approval for the transfer from Revenue Canada.

Comments

In order to determine whether an amount paid to the Individual out of the Taxpayer's unmatured RRSP would qualify as a refund of premiums within the meaning assigned by subsection 146(1) of the Act, we would have to determine whether the Individual was, in fact, the Taxpayer's spouse for purposes of the Act at the time of his death.

As noted in paragraph 4 of Interpretation Bulletin IT-500R titled "Registered Retirement Savings Plans - Death of an Annuitant", subsection 252(4) of the Act expands the meaning of spouse to include certain common-law couples. In addition to a person who is married to the taxpayer, a spouse is defined in paragraph 252(4)(a) of the Act as including a person of the opposite sex who cohabits with the taxpayer in a conjugal relationship and is either the parent of the taxpayer's child or has cohabited with the taxpayer throughout a 12-month period ending before that time. This is often referred to as a common law relationship. If during the 12-month period the parties separate for 90 days or more due to a breakdown in their conjugal relationship, a new 12-month period must be established commencing after the separation. Once a 12-month period has been established, it is not necessary to re-establish such a period after a separation of 90 days or more. However, during separations of 90 days or more which occur after the 12-month period is established, the couple will not be considered spouses under the Act.

Section 58 of the Succession Act allows the court to order adequate provision for the proper support of a deceased person's dependants where a deceased person may not have provided such support under his or her will. Section 57 of the Succession Act defines dependant to include, inter alia, a spouse of the deceased person, and defines spouse to include either of a man and woman who are not married to each other and have cohabited continuously for a period of not less than three years or cohabited in a relationship of some permanence, if they are the natural or adoptive parents of a child.

The Minutes represents nothing more than an agreement between the counsels for the Individual and the Taxpayer's estate. Consequently, the fact that the counsels are willing to treat the Individual as the Taxpayer's spouse for purposes of concluding a settlement does not allow us to conclude that the Individual was the spouse within the extended meaning as provided under subsection 252(4) of the Act.

In determining whether the Individual was the Taxpayer's spouse at the time of his death, we would have to look at all of the evidence that is available to support a conclusion that the conditions in subsection 252(4) of the Act are satisfied. We have reviewed the Second Pre-Trial Conference Memorandum (the "Memorandum") presented to XXXXXXXXXX by each counsel. We note that the Memorandum presenting the Individual's case provides arguments (including summaries of affidavits from friends of the deceased) supporting the fact that she and the Taxpayer cohabited in a conjugal relationship from XXXXXXXXXX until the time of his death. The Memorandum presenting the Taxpayer's estate's case argued that the Individual could not be the Taxpayer's spouse because the Taxpayer was not named as the beneficiary to her RRSPs, she filed her tax return as being single and she did not have a will of which the Taxpayer was a beneficiary. Based on the information contained in the Memorandums (including the arguments and counter-arguments), we are of the view that there is sufficient evidence supporting the Individual's status as the Taxpayer's spouse (as that term is defined in subsection 252(4) of the Act) at the time of his death.

Paragraph 12 of IT-500R provides the Department's general views regarding payments out of an RRSP to the spouse of the deceased annuitant. Where there is a refund of premiums and the legal representative for the deceased annuitant elects to deduct the amounts paid under subsection 146(8.9) of the Act, the taxation of the amounts paid would be shifted to the beneficiary and included in the beneficiary's income under subsection 146(8) of the Act. Paragraph 27 of IT-500R provides the Department's general views regarding the applicable rollover provisions. We would expect that if the Individual was the Taxpayer's spouse at the time of his death then she could have the amount in the Taxpayer's RRSP that qualifies as a refund of premiums transferred to her RRSP under paragraph 60(l) of the Act. We note that the income earned in the Taxpayer's RRSP in 1999 and paid to the Individual will not qualify as a refund of premiums because of the definition of tax-paid amount in subsection 146(1) of the Act.

We trust these comments will be helpful.

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate