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.
Principal Issues: a. What is the CRA's administrative position on the payment of interest on tax payable pursuant to subsections 159(5) to (7)?
b. What is the nature of the security that the CRA would accept?
d. Could the estate make payments earlier than specified if it chooses?
Position: a. The legal representative should contact the Revenue Collections Division of the local tax services office to ascertain the amount of interest to include in the next remittance.
b. Security acceptable would include a letter of credit, a bank guarantee, or a mortgage.
c. The amount is payable in no more than ten equal annual payments; hence, fewer than ten payments could be made.
Reasons: a. Interest, compounded daily, is charged at the prescribed rate. It is set quarterly, and consists of the average rate on 90-day treasury bills sold in the first month of the previous quarter, rounded up to the nearest percentage point, plus four percentage points. If that treasury bill rate changes, so would the prescribed interest rate.
b. The CRA's administrative position is to accept highly marketable securities.
d. Subsections 159(5) to (7).
QUESTION #6 - TAX PAYABLE ON A DEEMED REALISATION/DISPOSITION OF ASSETS PAYABLE IN INSTALMENTS
Under the Act, a deemed realization or a deemed disposition arises in respect of certain assets of a deceased taxpayer. The resulting tax payable may be remitted in up to ten equal annual instalments, plus interest, provided that the taxpayer's legal representative files an election in prescribed form, and furnishes acceptable security.
Our question concerns certain aspects of making payment under this basis.
a) While the Act is specific regarding the payment of the tax, it is silent on the payment of interest. What is the CRA's administrative position on the payment of the interest?
Answer
The issue is not one of an administrative position; rather, subsection 159(7) provides that interest is to be computed at the prescribed rate in effect at the time the election was made.
b) What is the nature of the security that the CRA would accept?
Answer
Security acceptable to the CRA would include a letter of credit, a bank guarantee, or a mortgage.
d) Could the estate make payments earlier then specified if it chooses?
Answer
The estate could opt to make payments earlier than specified. If the legal representative files an election, the tax and the interest must be paid in no more than ten instalments; hence fewer than ten instalments could be made.
Lindsay Frank
2011-040276
June 2-3, 2011
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