Principal Issues: [TaxInterpretations translation] In a particular situation, would the executor of the deceased spouse's estate (Mr. A) and the surviving spouse (Ms. A) be able to elect under the definition of "designated benefit" in subsection 146.3(1) in respect of the amount paid out of Mr. A's RRIF to the executor of Mr. A's estate.
Position: Yes.
Reasons: The amounts paid out of the fund after Mr. A's death to the legal representative would be refunds of premiums within the meaning of subsection 146(1) if they had been paid to Ms. A out of the fund and if the fund were an unmatured RRSP.
2006-020137 XXXXXXXXXX Guy Goulet, CA, M.Fisc. (819) 986-8098
November 14, 2006
Dear Sir,
Subject: RRIF on death
This is in response to your letter of August 17, 2006, requesting our comments on paragraph 146.3(1) in the Particular Situation described below.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
Particular Situation
Mr. A died in 2006. Immediately before his death, the fair market value ("FMV") of his registered retirement income fund ("RRIF") was $100,000 while the FMV of his other assets was $500,000. Mr. A was the last annuitant under his RRIF. Under the terms of his will, Mr. A left his entire estate to a spousal trust for his wife, Ms. A. Mr. A's will contained a capital encroachment clause that allowed for distributions out of the trust capital for the benefit of Ms. A. After Mr. A's death, the trustee made a capital distribution to Ms. A in the amount of $100,000, the FMV of Mr. A's RRIF immediately before his death. Thereafter, the executor of the estate and Ms. A jointly made an election under the definition of "designated benefit" in subsection 146.3(1) as to the $100,000 received by the RRIF executor. Finally, before the end of 2006, Ms. A contributed $100,000 from her own funds as a premium to an RRSP under which she was the annuitant.
Your Questions
You wish confirmation of your interpretation that in the Particular Situation, the executor of Mr. A's estate and Ms. A would be able to elect under the definition of "designated benefit" in subsection 146.3(1) in respect of the amount paid out of Mr. A's RRIF to the executor of Mr. A's estate.
Our Comments
It appears to us that the situation described in your letter may be an actual situation involving taxpayers. The Canada Revenue Agency ("CRA") does not generally provide written opinions on proposed transactions otherwise than by way of advance rulings. Furthermore, it is the responsibility of the relevant Tax Services Office to determine whether completed transactions have received proper tax treatment. We can, however, offer the following general comments which may not be fully applicable in a particular situation.
Under the definition of "designated benefit" in subsection 146.3(1), amounts paid out of a RRIF after the death of its last annuitant to the legal representative of that annuitant can be designated jointly by the legal representative and an individual if the amounts paid out would have been "refunds of premiums", as defined in subsection 146(1), had they were paid to the individual out of the fund and if the fund were an RRSP that had not matured before the death of the annuitant. In addition, paragraph (a) of the definition of "refund of premiums" in subsection 146(1) defines "refund of premiums" to mean any amount paid out of an RRSP as a consequence of the death of the annuitant under the plan to an individual who was, immediately before the annuitant's death, the annuitant's spouse or common-law partner, where the annuitant died before the maturity of the plan.
We are of the view that in the Particular Situation, the amount paid out of the RRIF after Mr. A's death to Mr. A's legal representative could be subject to the joint designation provided for in subparagraph (a)(ii) of the definition of "designated benefit" in subsection 146.3(1) since the amount paid out would be a "refund of premiums" under subsection 146(1) if the amount had been paid to Ms. A out of the fund and if the fund had been an RRSP that had not matured before Mr. A's death.
We hope that our comments are of assistance.
Best regards,
Ghislain Martineau
Manager
Financial Sector and Exempt Entities Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch