10 April 1997 External T.I. 9706185 - "AS A CONSEQUENCE OF DEATH"

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:

Whether surrender by children of their interest in an RRSP results in spouse receiving part of the RRSP as a "refund of premiums" (i.e. as a consequence of the death of the annuitant).

Position:

Yes.

Reasons:

"Surrender" in accordance with paragraph 248(9)(a) definition leads to beneficiary under resulting intestacy receiving "as a consequence of death" under paragraph 248(8)(b). Although subsection 248(8) refers to "transfer, distribution or acquisition" rather than "received" or "receipt", in our view this provision may be used to assist in determining whether RRSP amount received by spouse as a consequence of death.

XXXXXXXXXX 970618

Attention: XXXXXXXXXX

April 10, 1997

Re: "Refund of Premiums" on Death

This is in reply to your letter of February 26, 1997, in which you ask us to comment on a hypothetical situation involving the estate of an annuitant of an unmatured registered retirement savings plan (RRSP). Your question relates to the issue of whether the spouse, who is not named as the beneficiary of the RRSP in either the plan document or the will, can receive a "refund of premiums" as defined in subsection 146(1) of the Income Tax Act (the "Act").

Your question appears to relate to an actual fact situation and we are unable to reply to your specific concerns except in the context of an advance ruling request. We can, however, offer the following general comments.

The Department's general positions on this topic can be found in Interpretation Bulletin IT-500R. See in particular paragraphs 5 and 9 concerning the income inclusion to the deceased annuitant of an RRSP under subsection 146(8.8) of the Act and the deduction under subsection 146(8.9) of the Act with respect to the payment of a refund of premiums to the spouse.

Whether an amount is a "refund of premiums" as defined in subsection 146(1) of the Act in the situation you describe depends on whether the amount is "paid as a consequence of the death". Note that the phrase "amount paid as a consequence of the annuitant's death" is described in paragraph 17 of IT-500R as including a payment made by way of transfer or distribution of property.

Whether the surrender by the residuary beneficiaries of their interest under the will in a particular asset (the RRSP) which is part of the residue of the estate results in an intestacy with respect to that particular asset is a question of provincial law.

However, where the beneficiaries surrender (within the meaning of "surrender" as set out in subsection 248(9) of the Act) their interest in a specific asset and the spouse thereby acquires an interest in the asset, it is our view that the property becomes receivable by the spouse "as a consequence of the death" by virtue of paragraph 248(8)(b) of the Act.

Although the foregoing comments are not binding on the Department, we trust they will be of assistance to you.

Yours truly,

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