The executor of the estate of the deceased annuitant of an RRSP trust was unaware of the RRSP, did not notify the issuer of the RRSP, and settled and distributed the estate (to herself as the sole heir) without regard to the RRSP. After the RRSP became unclaimed property, a Commission (the "DPBNR") responsible for administering Québec’s Unclaimed Property Act ("UPA") instructed the RRSP issuer to wind up the RRSP, i.e. to dispose of the securities held therein, and to remit the proceeds of disposition in cash to the DPBNR. In a subsequent taxation year, the surviving spouse of the deceased RRSP annuitant claimed and received the amount (plus interest and net of fees) from the DPBNR by virtue of being the sole estate beneficiary.
CRA noted that the FMV of the property in the RRSP normally would have been included in the deceased annuitant’s income under s. 146(8.8) but here, there was no inclusion of such amount in the final return because the executor was unaware of the RRSP – and that return now was statute-barred. However, the amount paid to the surviving spouse was to be included in her income under the surrogatum principle as being in lieu of a payment received under s. 146(8). Such an amount would have been a “benefit” notwithstanding the exclusion in para. (a) of the “benefit” definition for an amount “included in computing the income of an annuitant by virtue of [s. 148(8.8].” CRA stated:
[I]t is not reasonable to consider all or part of the amount paid out of the RRSP to the DPBNR as part of the amount included in computing an annuitant's income by virtue of subsections 146(8.8) and (8.9) since, as noted above, no amount was included in computing the annuitant's income pursuant to subsections 146(8.8) and (8.9) in the annuitant's final return.