The estate of the deceased annuitant of an RRSP was fully settled without the executor (his surviving wife and the sole beneficiary) being aware of the RRSP. Later, the RRSP became unclaimed property and the Quebec Commission for dealing with unclaimed property (the “DPBNR”) instructed the RRSP issuer to liquidate the RRSP and remit the proceeds in cash to it. In a subsequent taxation year, the surviving spouse claimed and received the amount from the DPBNR as the sole estate beneficiary. The amount received by her was net of fees that were imposed by the DPBNR, which were treated under the unclaimed property legislation and regulations (the “UPA and RUPA”) as an obligation of the beneficiary. After finding that there was constructive receipt by her of the portion of the amount against which such fees had been levied, and that the amount received by her as so grossed-up was taxable to her under the surrogatum principle, CRA stated:
[A]s these fees were incurred for the administration and liquidation of the assets under administration, they do not constitute an expense incurred for the purpose of earning income and are therefore generally not deductible by the beneficial owner.