Definitions for What to do when someone has died

Adjusted cost base (ACB)

This is usually the cost of a property, plus any expenses to acquire it, such as commissions and legal fees.

The cost of a capital property is its actual or deemed cost, depending on the type of property and how you acquired it. It also includes capital expenditures, such as the cost of additions and improvements to the property. You cannot add current expenses, such as maintenance and repair costs, to the ACB of a property.

For more information on ACB, see Interpretation Bulletin IT456, Capital Property - Some Adjustments to Cost Base, and its Special Release.

If the deceased filed Form T664 or T664 (Seniors), Election to Report a Capital Gain on Property Owned at the End of February 22, 1994, the ACB of the property may change. For more information, see Guide T4037, Capital Gains.

Administrator

There may not be a will, or the will may not name an executor. In this case, a court will appoint an administrator to handle the deceased's estate. An administrator is often the spouse, common-law partner, or the next of kin.

Advantage

See Eligible amount of the gift.

Annuitant

Generally, an annuitant is the person for whom a retirement plan provides a retirement income. In certain circumstances, the surviving spouse or common-law partner may qualify as the annuitant when, because of the death, he or she becomes entitled to receive benefits out of the retirement plan.

Annuity payment

This is a fixed periodic payment that a person has the right to receive, either for life or for a specific number of years. These payments represent a partial recovery of financing and a return (interest) on the capital investment.

Arm's length

Refers to a relationship or a transaction between persons who act in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

“Related persons” are not considered to deal with each other at arm’s length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

“Unrelated persons” may not be dealing with each other at arm’s length at a particular time. Each case will depend upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm’s length:

• whether there is a common mind which directs the bargaining for the parties to a transaction;
• whether the parties to a transaction act in concert without separate interests; “acting in concert” means, for example, that parties act with considerable interdependence on a transaction of common interest; or
• whether there is de facto control of one party by the other because of, for example, advantage, authority or influence.

For more information, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.

Capital cost allowance (CCA)

In the year you buy a depreciable property, such as a building, you cannot deduct the full cost. However, since this type of property wears out or becomes obsolete over time, you can deduct its capital cost over a period of several years. This deduction is called CCA. You cannot claim it for the fiscal period that ends on the date of death.

When we talk about CCA, a reference is often made to class. You usually group depreciable properties into classes. You have to base your CCA claim on the rate assigned to each class of property.

Capital property

This includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. You usually buy it for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory. Some common types of capital property include cottages, land, buildings, equipment used in a business or rental operations, and securities such as stocks, bonds, and units of a mutual fund trust.

Common-law partner

This applies to a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. He or she:

1. has been living with you in a conjugal elationship, and this current relationship has lasted at least 12 continuous months;

   Note
   In this definition, 12 continuous months includes any period that you were living separate and apart for less than 90 days because of a breakdown in the relationship.

2. is the parent of your child by birth or adoption; or
3. has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.

Deemed disposition

This expression is used when a person is considered to have disposed of a property, even though a sale did not take place.

Deemed proceeds of disposition

This is an expression used when a person is considered to have received an amount for the disposition of property, even though the person did not actually receive that amount.

Depreciable property

This is usually capital property used to earn income from a business or property. The capital cost can be written off as CCA over a number of years.

Eligible amount of the gift

This is generally the amount by which the fair market value of the gifted property exceeds the amount of the advantage, if any, received for the gift.

The advantage is generally the total value of all property, services, compensation, or other benefits to which you are entitled as partial consideration for, or in gratitude for, the gift. The advantage may be contingent or receivable in the future, and given either to you or a person not dealing at arm's length with you.

The advantage also includes any limited-recourse debt in respect of the gift at the time it was made. For example, there may be a limited-recourse debt if the property was acquired as part of a gifting arrangement that is a tax shelter . In this case, the eligible amount of the gift will be reported in box 13 of Form T5003, Statement of Tax Shelter Information. For more information on tax shelters and gifting arrangements, see Guide T4068, Guide for the Partnership Information Return (T5013 forms)

Eligible individual

An eligible individual is a child or grandchild of a deceased annuitant under an RRSP, or a RRIF, or of a deceased member of a registered pension plan, who was financially dependent on the deceased for support at the time of the deceased's death, because of an impairment in physical or mental function.

Executor

This is an individual or trust institution named in a will and confirmed by a court to settle the deceased's estate.

Fair market value (FMV)

This is usually the highest dollar value that you can get for your property in an open and unrestricted market between a willing buyer and a willing seller who are acting independently of each other.

Liquidator

In Quebec, the liquidator is responsible for distributing assets of all estates. For estates with a will, the liquidator's role is similar to an executor's. For estates without a will, the liquidator acts as the administrator of the estate.

Locked-in

This means that the beneficiary who is to receive the property has a right to absolute ownership of it. No future event or development can take this right away. In order for a property to be locked-in:

• for a spousal or common-law partner trust, it has to become locked-in before the surviving spouse or common-law partner dies; and
• for an individual, it has to become locked-in before the individual dies.

Non-arm's length

Generally refers to a relationship or transaction between persons who are related to each other.

However, a non-arm’s length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see arm’s length.

Qualified donees

Qualified donees are as follows:

• registered charities;
• registered Canadian amateur athletic associations;
• registered national arts service organizations;
• registered housing corporations resident in Canada set up only to provide low-cost housing for the aged;
• registered municipalities in Canada;
• registered municipal or public bodies performing a function of government in Canada;
• the United Nations and its agencies;
• registered universities outside Canada that are prescribed to be universities the student body of which ordinarily includes students from Canada;
• Her Majesty in right of Canada, a province, or a territory; and
• before June 23, 2015, registered foreign charitable organizations to which Her Majesty in right of Canada has made a gift. For gifts made on or after June 23, 2015, registered foreign charities (which now include foreign charitable foundations) to which Her Majesty in right of Canada has made a gift.

Specified RDSP payment

A specified RDSP payment is a payment that:

• is made to an RDSP under which the eligible individual is the beneficiary;
• is made after June 2011; and
• satisfies contribution conditions described in Guide RC4460, Registered Disability Savings Plan.

Spouse

This is a person to whom you are legally married.

Testamentary spousal or common-law partner trust

This is a trust created by the deceased's will, or a court order in relation to the deceased's estate made under any law of a province or territory that provides for the relief or support of dependants. The surviving spouse or common-law partner is entitled to all the income of the trust that arises before he or she dies. No one else can receive or use the trust's income or capital before the surviving spouse's or common-law partner's death.

For more information, see IT305, Testamentary Spouse Trusts.

Testamentary debts

These are debts or liabilities of all kinds that an individual incurred and did not pay before death. It also includes amounts payable by the estate because of death.

Undepreciated capital cost (UCC)

Generally, UCC is equal to the total capital cost of all the properties of a class minus any capital cost allowance claimed in previous years. When property of the class is disposed of, you also have to subtract from the UCC one of the following two amounts, whichever is less:

• the proceeds of disposition of the property (either actual or deemed) minus the related outlays and expenses to sell it; or
• the capital cost of the property.

Date modified:

2016-01-05