Principal Issues: [TaxInterpretations translation] Does subsection 118.1(5) apply to a cash payment of a charitable gift under the individual's will if the payment is made by the individual's legal representative after the normal reassessment period for the taxation year in which the individual died?
Position: Yes.
Reasons: Provided all the conditions of section 118.1 are satisfied and the legal representative so requests, paragraph 152(4.2)(a) permits a reassessment to be made after the end of the normal assessment period for the taxation year in which the individual died.
2005-013694 XXXXXXXXXX Guy Goulet, CA, M.Fisc. (613) 957-9768 June 22, 2005
Dear Sir,
Subject: Request for an advance ruling - XXXXXXXXXX
This is further to your letter of June 8, 2005, requesting an advance income tax ruling on behalf of the late XXXXXXXXXX with respect to the cash disbursement of charitable gifts under that individual’s will by the legal representative of the deceased after the expiration of the normal reassessment period for the taxation year of the death to entities described in the definition of "total charitable gifts" in subsection 118.1(1).
In the event that an advance income tax ruling is not issued by the CRA, you would like our comments on the application of subsections 118.1(5) and 152(4.2) to this situation.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
The situation you have indicated in your letter is of the same nature as transactions that have been completed and are the subject of an adjustment request. As stated in paragraph 15(a) of Information Circular 70-6R5 of May 17, 2002, it is our practice not to issue an advance ruling in such a situation.
Also, paragraph 22 of that Information Circular states that it is our practice not to issue a written opinion on completed transactions. Furthermore, it is up to the relevant Tax Services Office or Tax Centre to determine the appropriate tax treatment of a completed transaction. We can, however, offer the following general comments which may not be fully applicable in a particular situation.
Subsection 118.1(5) deems an individual who makes a gift by the individual’s will to have made the gift immediately before death. Where this deduction applies, the individual may be entitled to a deduction in computing the individual’s tax pursuant to subsection 118.1(3) for the taxation year of death even if the gift was made by the individual's legal representative in a subsequent taxation year and after the tax return for the year of death was filed.
Whether or not a gift was made by will is a question that must be resolved in light of all the relevant facts. In general, the making of the charitable gift by the deceased's legal representative may be considered to have been made by will, for the purposes of subsection 118.1(5), if the will requires that the gift be made by the legal representative to a qualifying entity and if it specifies the amount of the gift to be made or stipulates that the amount is a percentage of the residue of the estate's property.
Notwithstanding subsections 152(4), (4.1) and (5), paragraph 152(4.2)(a) allows, in certain situations, for a reassessment by the Minister after the end of the normal reassessment period for the taxpayer for a particular taxation year, on application by the taxpayer. That paragraph applies in situations where the taxpayer is an individual, other than a trust, or a testamentary trust, and the application is for the determination of a refund to which the taxpayer was entitled or the reduction of an amount payable by the taxpayer for the particular taxation year under Part I of the Act.
It appears to us that in the situation you have described, a request for reassessment under paragraph 152(4.2)(a) for the taxation year of the late XXXXXXXXXX's death to take into account gifts made by her legal representative under a will after the expiration of the normal reassessment period applicable for that taxation year could be made by the deceased’s legal representative to the Tax Centre responsible for the tax return in question if all of the conditions set out in section 118.1 were satisfied.
Finally, please note that our comments do not constitute an advance income tax ruling and, as stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, are not binding on the CRA with respect to any particular situation.
Your deposit will be returned to you under separate cover.
We hope that our comments are of assistance.
Best regards,
Ghislain Martineau
for the Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Directorate General for Policy and Planning