10 April 1996 Internal T.I. 9609467 - ITC-TSFR. ON 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.

April 10, 1996

Kitchener-Waterloo Tax Services Office Resources, Partnerships
Mark Deakin and Trusts Division
Director F. B. Fontaine

Attention: Gary Huenemoeder
Tax Audit Division
7-960946

Investment Tax Credit of Deceased Taxpayer

This is in reply to your memorandum dated March 12, 1996, concerning whether the unused investment tax credit ("ITC") of a deceased taxpayer (the "taxpayer") should be rolled over to his spouse.

Our understanding is that the taxpayer, prior to his death, carried on a farming business as a sole proprietorship. On the taxpayer's death the assets of the business were transferred to the spouse under subsection 70(6) of the Income Tax Act (the "Act") and used by the spouse to carry on the business. The taxpayer had no taxable income in his final year and could not use the unused ITC.

The taxpayer carried on an unincorporated business. Any ITC earned would belong to the taxpayer rather than the business and any ITC earned by the taxpayer that was not used in his tax return for the year in which he died would be lost.

We are not aware of any provision under the Act that would allow the unused ITC of an individual, in the circumstances described, to be transferred to individual's spouse. It is our view that no deficiency in the legislation exists. XXXXXXXXXX

It should be noted that the property transferred to the spouse under subsection 70(6) of the Act would not be "new" to the spouse as it had been used by the taxpayer. Accordingly, the spouse would not be entitled to any ITC on that property.

Based on our comments, we would conclude that the taxpayer's unused ITC at the time of death may not be transferred to the taxpayer's spouse.

We hope that the above comments will provide some clarification of the law as it applies to the particular situation.

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch