Principal Issues: [TaxInterpretations translation] Does the CRA find that the delay in liquidation is reasonable given the various facts submitted?
Position: It is possible that the succession will be settled and cease to exist on that date. The answer is the same for all scenarios.
Reasons: Whether the time to liquidate a succession is reasonable is a question of mixed fact and law that requires a complete analysis of all the facts in a particular situation. Generally, a succession exists as long as it is not settled.
In this case, it is possible that as of June 30, 2011, the succession will be settled and cease to exist on that date. In such a case, the tax would be subsequently imposed on the legatees of the estate.
FEDERAL TAX ROUNDTABLE 7 OCTOBER 2011
APFF CONFERENCE 2011
Question 11
Succession
Facts
Consider the following situation:
Mr. X was a resident of Quebec. On February 5, 2010, Mr. X died.
His will provides for the transfer of his property in equal shares to his two minor children aged 10 and 15 years. Mr. A, a brother of Mr. X, is appointed liquidator of the succession of Mr. X ("Succession X").
Mr. X's will does not provide for the creation of a testamentary trust.
As of June 30, 2011, all the liabilities of Succession X have been paid and all the liquidator's duties have been completed in due form. The only asset of Succession X is $400,000 in cash, which is required to be divided equally between Mr. X's two children under the terms of the will of Mr. X.
Mr. A, the liquidator, will wait until the year 2025 before proceeding with distributing the money to the beneficiaries and liquidating Succession X.
Between the commencement of Succession X on February 5, 2010 and the liquidation date of Succession X on February 4, 2025, Form T3 "Trust Income Tax and Information Return" will be filed on time and the balance of Tax will be paid, if applicable.
Analysis
Under article 613 of the Civil Code of Québec ("CCQ"), the succession of a person opens by his death.
Subsections 104(1) and 108(1) provide that a testamentary trust includes an estate.
When a person dies, the succession of the deceased person is considered a trust for the time it takes to settle the deceased person's affairs and distribute the property to the beneficiaries.
Questions to the CRA:
a) Does the CRA consider the period for proceeding with the liquidation to be reasonable given the facts submitted? If not, what is the liquidation date that the CRA would find reasonable?
b) Would the answer to question a) be the same if the individual had died without having made a will and with only his two children as heirs?
c) Would the answers to questions a) and b) be the same if the heirs were of age at the time of Mr. X's death?
CRA Response
a) Whether the time to liquidate an estate is reasonable is a question of mixed fact and law that requires a complete analysis of all the facts in a particular situation. Generally, a succession exists as long as it is not settled.
In this case, it is possible that as of June 30, 2011, the succession will be settled and cease to exist on that date. In such a case, the tax would be subsequently imposed at the level of the legatees of the estate.
b) Yes.
c) Yes.
Anne Dagenais
(613) 957-2121
October 7, 2011
2011-041184