5 February 1986 Income Tax Severed Letter 5-0023 - [Annual Accrual & Deceased Taxpayer]

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.

R.A. Primeau (613) 993-7295

February 5, 1986

Dear XXXX

Re: Annual Accrual & Deceased Taxpayer

This is in reply to your letter of November 7, 1985 regarding comments made to you in our letter of October 31, 1985.

Having reviewed the relevant provisions as they applied to the periods prior to November 17, 1978 and subsequent to November 16, 1978, we agree that a termination, in consequence of the death of the annuitant, of a life annuity contract that was entered into prior to November 17, 1978 does not result in a "disposition" for purposes of paragraph 148(9)(c) of the Income Tax Act. Thus, the death benefit paid out of such a contract would not be taxable under subsection 148(1).

The above-stated conclusion is not affected by the fact that the life annuity contract in question was subject to the third anniversary accrual rules by virtue of paragraph 12.2(3)(b) and that income was reported under subsections 12.2(3) or 12.2(4) in taxation years prior to the year in which the annuitant died.

We trust that the above satisfactorily answers your query.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch