After the death of her husband, the taxpayer received the proceeds of his RRSP as the designated beneficiary thereof, and transferred those proceeds to her locked-in retirement account. The FMV of the RRSP on his death was less than the current balance of his federal taxes owing. CRA assessed the taxpayer for an amount equal to the fair market value of the RRSP on his death, on the basis that she had not ceased to be the “spouse” of the deceased on his death for purposes of s. 160(1)(a).
Before allowing the taxpayer’s appeal on the basis that she was not a “spouse” of the deceased when his RRSP assets were transferred to her, Webb JA indicated:
- “Since the ordinary meaning of ‘spouse’ is a person who is married to another individual and since marriage ends on death, this would lead to the conclusion that when a marriage ends as a result of the death of one of the individuals, the survivor ceases to be the ‘spouse’ of the deceased.” (para. 30)
- When it added “common-law partner” to the Act in 2000, Parliament also changed all of the references to “spouse” to “spouse or common-law partner” so that it “is self-evident that Parliament intended the Act to apply equally to couples, whether they were married or in a common-law partnership” (para. 41) and so “that ‘spouses’ and ‘common-law partners’ should be treated in the same way” (33).
- It therefore was relevant that the opening part of the definition of “common-law partner” contemplates two individuals who are cohabiting in a conjugal relationship, and that “[t]wo individuals would not be cohabiting in a conjugal relationship following the death of one of them” (para. 36).
- Although the “common-law partner” definition generally deemed those who have been cohabiting to thereafter be common-law partners, and a literal application of this provision would deem them to continue as such even after one had died, this “could not have been the intended result” (para. 40).
- Furthermore, since in light of s. 251(6)(b) “a marriage ends on the death of one of the individuals … [t]o have the same rules apply to individuals in a common-law partnership, that relationship would also have to cease upon the death of one of the partners” (para. 44).
- Regarding a purposive interpretation of s. 160(1)(a), Webb JA noted that the Crown’s interpretation entailed the inclusion of the FMV of the RRSP in the income of the designated beneficiary who, in this situation, “would have to withdraw the funds from the locked-in retirement account (if she is able to do so)” (para. 56) with a resulting further income inclusion to her, and it was “far from clear that Parliament would have intended this result following the death of a person’s partner” (para. 58).