5-903202
Dear Sirs:
This is in reply to your letter of November 5, 1990 concerning the election available under subsection 146(8.1) of the Income Tax Act (the "Act").
Your particular concern is with respect to the comments in paragraph 10 of Interpretation Bulletin IT-500. You describe a situation where an estate receives $225,000 out of the deceased's unmatured registered retirement savings plan ("RRSP"), the spouse's share of the estate pursuant to the deceased's Will is valued at $142,000 and the funds available for distribution out of the estate to all beneficiaries amount to $275,000. In such a situation, you say that you would normally pay the spouse's portion entirely out of the RRSP proceeds and, since those proceeds would carry with them a deferred Income tax liability, the amount paid to the spouse would be greater than the $142,000 referred to above to give effect to that deferred tax liability. For example, if all beneficiaries agreed, the spouse might be paid, say, $160,000 on the basis that such amount has a value of only $142,000 after taking into consideration the deferred tax liability. You ask if that $160,000 can be designated for the purposes of subsection 146(8.1) of the Act rather than $142,000, the value of the spouse's interest in the estate.
Our Comments
It would seem to us that what is involved is essentially a private matter between a trustee and the beneficiaries of an estate concerning the valuation of property to be allocated to each beneficiary, a matter that normally does not concern the Department. If, in the situation described above, the trustee and the beneficiaries agree that the spouse should be paid $ 160,000 out of the RRSP proceeds, a designation of that amount for the purposes of subsection 146(8.1) would be reasonable in our view.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust however that they are of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate