No distributions had been made from the FHSA of Individual A, who died on September 1 of Year 1 without a surviving spouse or common-law partner, by December 31 of Year 2 and the property in the FHSA has a fair market value of $30,000 at that time.
Situation 1 – If Individual A had designated three siblings as equal beneficiaries under the FHSA in accordance with provincial law, would each sibling be required to report $10,000 in Year 2?
Situation 2 – If Individual A’s estate had been designated as beneficiary under the FHSA in accordance with provincial law, would it be required to report $30,000 in Year 2?
Situation 3 – If Individual A had not designated any beneficiary under the FHSA so that the FHSA proceeds were payable to the individual’s estate, whose residual beneficiaries per the will were the three siblings, would the estate be required to report $30,000 in Year 2.
CRA noted that where an FHSA ceased to be an FHSA at the end of the year following the year of death of the last holder, proposed s. 146.6(17)(c) provides that the proportion of the FMV of all the property of the arrangement that a beneficiary is entitled to, determined at such time of cessation, is deemed for purposes of s. 146.6(14) to be distributed at that time from the FHSA to the beneficiary, so that such deemed amount is included in the beneficiary’s income for the year under s. 146.6(14). CRA then indicated that, on the assumption that, under the provincial law, the beneficiaries under the FHSA were the siblings in Situation 1, and the estate in Situations 2 and 3, there would be an inclusion in such beneficiaries’ income pursuant to s. 146.6(17)(c).