Principal Issues: How is a unitholder's income determined in the year of death?
Position: Income payable to the unitholder.
Reasons: Pursuant to subsection 104(13).
XXXXXXXXXX 2011-040356 Katharine Skulski
February 13, 2012
Dear XXXXXXXXXX :
Re: Unitholders income in year of death
This is in response to your email of April 14, 2011 inquiring about the definition of taxation year in the context of the timing of income recognition by a beneficiary of a mutual fund trust who has died. All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.), c. 1, as amended (the "Act").
For the purposes of providing our general comments, we have assumed the trust you have referred to is a "mutual fund trust" as defined in subsection 132(6) and that the amount of capital and income to be distributed are known at the time that any amounts are made payable to the beneficiary. In addition, our comments below do not take into consideration the consequences of any deemed dispositions that may occur as a consequence of death.
Generally, pursuant to subsection 104(13) of the Act, a unitholder of a mutual fund trust must include in income for a given taxation year, the portion of the income of the mutual fund trust in respect of the trust's taxation year that ends in that given year, as became payable to the unitholder. The taxation year of an individual is defined in subsection 249(1) as being a calendar year. There is no provision in the Act that shortens a taxpayer's taxation year in his or her year of death so as to cause it to end as at the taxpayer's date of death.
We trust that these comments will be of assistance.
Yours truly,
Phil Kohnen
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch