21 December 2004 External T.I. 2004-0093361E5 F - Report de l'impôt minimum de remplacement-décès
Principal Issues: [TaxInterpretations translation] Given that subsection 120.2(2), which allowed for a 3-year carryback, has been repealed, is there any way or provision in the Act that would allow Mr. X, who died in 2004, to recover the amount of AMT paid in 2003?
Position: No
Reasons: If the tax generated in 2004 is insufficient to recover the AMT paid in 2003, the individual can no longer benefit from a carryback under subsection 120.2(2) of the Act. This type of carryback was eliminated at the same time as changes were made to eliminate the alternative minimum tax in the year of an individual's death.
XXXXXXXXXX 2004-009336
N. Deslandes, CGA
December 21, 2004
Dear Madam,
Subject: Deferral of the alternative minimum tax in the event of death
This is in response to your letter of August 18, 2004 in which you requested our opinion on the above subject. We apologize for the delay in responding to your request.
You presented the situation of an individual, Mr. X, who had to pay, for his 2003 taxation year, an amount of alternative minimum tax ("AMT") in accordance with section 127.5 of the Income Tax Act (the "Act").
In January of the following year, Mr. X died. You indicated that although subsection 120.2(1) generally allows for a reduction in the tax payable over the following 7 years by the AMT paid in 2003, Mr. X's death will mean that he will have only one year to recover the AMT paid in 2003. You pointed out that, given the date of Mr. X's death and the nature and value of the assets he held on that date, the amount of tax he will have to pay in 2004 is clearly insufficient to recover the AMT paid in 2003.
Your Question:
Since subsection 120.2(2), which allowed for a 3-year carryback, was repealed, you asked if there is any way or provision in the Act that would allow Mr. X to recover the AMT amount paid in 2003.
Our Comments:
The situation you have indicated in your submission appears to relate to a factual situation involving a specific taxpayer or taxpayers. As explained in Information Circular 70-6R5, it is not the Directorate's practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance tax ruling. However, we can offer the following general comments that we hope may be helpful to you. These comments may not, however, apply to your particular situation in certain circumstances.
Section 127.55 was amended in 1988 to eliminate the AMT that could arise in a taxation year in which an individual died. This amendment was enacted to address the possibility that a significant AMT liability might arise from the capital gain resulting from the deemed disposition of all of an individual's property at death, which, in the view of the legislature, would have produced a questionable result in terms of tax policy. At the same time, subsection 120.2(2), which allowed the AMT to be carried back to the three taxation years preceding the year of an individual's death, was repealed as being too complex.
Unfortunately, other than subsection 120.2(1), there is no other provision in the Act that would allow for the recovery of the AMT paid in the year before death in a case such as the one presented. To do so would require an amendment to the provisions of the Act. As you know, the responsibility for developing tax policy and amending the Act rests with the Department of Finance. If you wish to make representations concerning amendments to the Act, you may send your comments to the Department of Finance, Tax Policy Branch, Tax Legislation Division, L'Esplanade Laurier, 140 O'Connor Street, 17th Floor, East Tower, Ottawa, Ontario, K1A 0G5.
These comments are not advance income tax rulings and do not bind the Canada Revenue Agency with respect to any particular factual situation.
We hope you find these comments of assistance.
Best regards,
Ghislain Martineau, CGA
Manager
Financing and Plans Section
Financing and Plans Division
Policy and Planning Branch