20 March 2009 External T.I. 2008-0300791E5 - Right or thing-dividends paid by post-dated cheque

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: Whether a cheque to pay dividends that is dated the same day on which the shareholder dies is considered to be a right or thing.

Position: No

Reasons: Cheque is negotiable at the time of death.

									2008-030079
XXXXXXXXXX  							Vivian Shih, CA
(613) 957-2103
March 20, 2009

Dear XXXXXXXXXX :

Re: Whether a dividend paid by a post-dated cheque is a right or thing

This is in response to your letter of November 18, 2008 requesting our comments with respect to the following facts:

(a) A corporation declared a dividend payable to shareholders on a subsequent date;
(b) Cheques were prepared and given to shareholders and the cheques were post-dated to that subsequent date;
(c) A shareholder died in the early morning of the date of the cheque; and
(d) The shareholder had not cashed the cheque at the time of death.

You have asked for our views as to whether the dividend was a right or thing for purposes of subsection 70(2) to the shareholder at the time of death.

The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments which may be of assistance.

Unless otherwise stated in this letter, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the "Act").

Subsection 70(2) sets out the tax treatment of "rights or things" that a taxpayer had at the time of death, the amount of which when realized or disposed of would have been included in the taxpayer's income. The value of the "rights or things" at the time of death must be reported in the taxpayer's final return unless an election is made to file a separate return in respect of these amounts. The CRA's general views regarding "rights or things" are found in Interpretation Bulletin IT- 212R3, "Income of deceased persons - Rights or things". Paragraph 12 of IT-212R3 confirms that a dividend that was declared but not paid before the taxpayer's death is a right or thing. In our view, "rights or things" would not include a dividend that has been paid by a cheque that is negotiable on the date of death.

This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.

We trust our comments will be of assistance.

Yours truly,

Robin Maley
For Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch