This is in reply to your memorandum of September 3, 1991 concerning comments made in a letter of April 10, 1991 from this Division, a copy of which was sent to you for reference purposes.
More specifically, you ask us to reconsider our comments that the expression "in a taxation year" in subsection 146(8.1) of the Act refers to the taxation year of the deceased's estate and that the designated amount would therefore be included in the beneficiary's income for the taxation year in which the estate's fiscal period ends.
Our Comments
Where a subsection 146(8.1) designation is made, the effect of the designation is that the beneficiary is deemed to have received directly out of the RRSP a benefit equal to that portion of the RRSP payment that would have been a refund of premiums had she in fact received it directly. The designated amount thus becomes income of the beneficiary under subsection 146(8) rather than income of the deceased under 146(8.8) (or rather than income of the estate where the designated amount exceeds the RRSP FMV on death). It is therefore irrelevant whether the reference to "paid in a taxation year" refers to paid in the estate's taxation year or paid in the beneficiary's taxation year. What is relevant is that the beneficiary is deemed to have received the designated amount directly out of the RRSP on the date the payment was made and if, for example, that date is in the 1991 calendar year, the beneficiary would include the designated amount in her 1991 income under subsection 146(8) as a benefit received by her out of an RRSP.
The comments in the April 10, 1991 letter concerning the taxation year in which the beneficiary would include the designated amount in income were based on paragraph 104(23)(C), which paragraph sets out the taxation year in which an amount payable to a beneficiary out of the income of a testamentary trust is to be included in the beneficiary' s income pursuant to subsection 104(13). However, as noted above, an amount properly designated under subsection 146(8.1) is not income of the estate. Consequently, subsection 104(13) and paragraph 104(23)(C) do not apply to that amount.
We regret any inconvenience caused by the comments in the letter of April 10, 1991.
for DirectorFinancial Industries DivisionRulings Directorate