Ch. 21 - Death of a Taxpayer

Question 1

1. ITA 70(5)

2. ITA 70(6)

Answer 1

1. the taxpayer is deemed to dispose of their assets immediately before death
2. property left to the spouse or common-law partner roll over at the tax cost

Question 2

Capital loss rules on death

Answer 2

If capital losses exist, they are used against:

1. capital gains then
2. other income in the terminal return then
3. other income in the prior year return

Question 3

Death of a taxpayer - unmatured RRIF

1. beneficiary is spouse

Answer 3

1. If spouse is the successor annuitant, regular payments continue. If spouse if not successor annuitant, RRIF is disposed of by decreased and taxed in the hands of the spouse (it can be added to the spouses RRIF and deducted from income)

Question 4

Death of a taxpayer - unmatured RRIF

1. beneficiary is not spouse

Answer 4

1. The FMV of the RRIF at time of death is taxed in the deceased taxpayers final return

Question 5

Death of a taxpayer - unmatured RRSP

1. beneficiary is spouse

Answer 5

1. FMV of RRSP is taxed in the hands of the spouse. The amount can be contributed to spouses RRSP for deduction. No impact on spouses contribution limit.

Question 6

Death of a taxpayer - unmatured RRSP

1. beneficiary is not spouse

Answer 6

1. The FMV of the RRSP at the time of death is taxed in the deceased taxpayers final return

Question 7

Death of a taxpayer - unmatured TFSA

1. beneficiary is spouse

Answer 7

1. spouse becomes new beneficiary and keeps the tax-exempt status

Question 8

Death of a taxpayer - unmatured TFSA

1. beneficiary is not spouse

Answer 8

1. If no beneficiary is named, the TFSA goes into the estate

Question 9

Death of a Taxpayer - Terminal or Final Return

1. Time frame
2. Includes

Answer 9

1. from 1 January to the date of death

2. Dispositions as amounts accumulated up to the time of death

Question 10

Rights or Things Return - examples of ‘rights or things’

Answer 10

1. matured but unclipped bonds
2. dividends declared but unpaid
3. salaries earned but unpaid

Question 11

Rights or Things Return - Three Options for Rights or Things Reporting

Answer 11

1. include in final/terminal return with other income
2. an election can be made to file a separate tax return for them
3. They can be transferred to beneficiaries is stated in the will

Question 12

Rights or Things Return - Possible Benefits

Answer 12

1. can use graduated rates from the separate return

2. can use additional tax credits from the separate return

Question 13

Death of a Taxpayer - Personal tax credits available

Answer 13

1. Basic personal credit
2. age amount
3. spouse or equivalent
4. caregiver

Question 14

Death of a Taxpayer - Donations

Answer 14

1. 75% rule does not apply in year of death or prior year

2. credit can be split between final/terminal and rights or things return

Question 15

Death of a Taxpayer - Final Return Due Date

Answer 15

6 months after death

Question 16

Death of a Taxpayer - Rights or Things Due Date

Answer 16

the later of:

1. one year after the date of death
2. 90 days after assessment of final return