The executor wished to have $50,000 of the value of the RRSP of the deceased (Mr. X) included in his income, and for the balance of $200,000 to be transferred on a rollover basis to his surviving spouse (Ms. Y). However, when the property in the RRSP was transferred to an estate account later in the year (on July 1, 2018), it had appreciated to $255,000. In December 2019, the executor paid $205,000 to Ms. Y, who contributed that amount to her RRSP. That amount was designated by the executor and Ms. Y on Form T2019 as a refund of premiums, so that Mr. X had a $50,000 inclusion in his terminal return.
Taking into account that an amount jointly designated under s. 146(8.1) is deemed to be received by an eligible beneficiary, is the income of $5,000 required to be included on the estate’s T3 return and shown on a T3 slip as distributed to the eligible beneficiary? CRA responded:
By virtue of subsection 146(8.1), where a deceased annuitant's RRSP amount is paid to the deceased's legal representative, and that amount would have been a refund of premiums if it had been paid to the beneficiary of the estate, that amount is deemed, to the extent it is so designated jointly by the legal representative and the individual in Form T2019, to be received by the beneficiary at the time it was so paid as a benefit that is a refund of premiums.
A "refund of premiums" within the meaning of subsection 146(1) includes inter alia any amount paid to the annuitant's spouse or common-law partner out of or under an RRSP where the annuitant died before the maturity of the plan and the amount is paid as a consequence of the death of the annuitant under the plan, other than a tax-paid amount in respect of the plan. The increase in the FMV of RRSP property determined after the date of death to December 31 of the taxation year following the death of the annuitant is generally not a "tax-paid amount" as defined in subsection 146(1) and could be a refund of premiums.
In the situation described, the sum of $205,000 jointly designated by the legal representative and the spouse, Ms. Y, on Form T2019 would be deemed to have been received by Ms. Y (and not by the legal representative) in respect of a benefit that is a refund of premiums. That amount should be included in computing Ms. Y's income for the 2018 taxation year under subsection 146(8) and paragraph 56(1)(h), being the taxation year in which the benefit is deemed to have been received by Ms. Y.
Where at the time of filing the T3 Trust Income Tax and Information Return, the election under subsection 146(8.1) has been made, the increase in the FMV of the RRSP property determined after the date of death that is a refund of premiums would not have to be reported in the T3 return of the estate.