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Death & Taxes

What to do when someone has died
2016 rules changes re donations, etc.
Estate donations - former graduated rate
Types of Trusts
Residence of Trust/Estate IT 447

See Leaving Canada - if a trust ceases to be resident because the trustee leaves Canada, deemed disposition of all property except for certain property, see S 128.1(4)(b) and S. 115(1)(b)


Filing Due Dates
Due Dates
Key sections of the ITA
S. 69 FMV of property becomes cost

Exception S. 73(1) cost is UCC for spousal trust created by testament

S. 70 Death of a Taxpayer
S. 72 Reserves etc for year of death
s. 75 Trust property substitutions
S. 104 sets out Trust Rules

S. 104 definitions are a must read and a trust is taxed as an individual, hence, all trusts except testamentary trusts have a calendar year end. Testamentary trusts are allowed a non calendar year end in S. 104(23) testamentary rules are set out including taxation years must be no more than 12 calendar months from the date of death.

S. 108 Definitions
Returns required S.150(1)
Forms & Guides
Trusts - Guides, returns, schedules (forms)
T3 Trust Income Tax Return
T3 Slips to allocate income and designations
T4 for executor/trustee fees paid to resident

See third bullet point

T4A-NR- paid non resident for services in Canada
NR4 paid or credited to non resident beneficary
Income and Expenses of a Trust/Estate
T4013 T3 Trust Guide
Allocation of income to beneficiaries
T3 Schedule 9 Income allocation and designations

Income allocated to a beneficiary is deducted from income of the trust and may include:

  • income allocated to a preferred beneficiary (may or may not have been paid)

  • amounts paid or payable by the estate/trust to the beneficiary

  • personal use of trust property leading to a taxable benefit

  • benefits to beneficiary not included elsewhere in income

Non resident beneficiaries are subject to 25% withholding under S. 212(1)(c) unless a treaty is in force

Capital gains (not losses) flow thru

See S. 104(21) and calculation in S. 104(21.1)

IT 381 Trusts CGains/losses and flow-thru of TCG
Flowthru taxable dividendsS.104(19)
Flowthru nontaxable dividends S. 104(20)
Flowthru foreign income/tax paid S.104(22/22.1)
Flow thru pension/pension credit S.104(27)
Registered plans
Election on matured RSP converted to annuity

Where RSP matured and annuity in place, election under S. 146(8.91) where estate named, spouse would receive and pay tax on annuity payments, or children/grandchildren if no spouse

Death of RSP annuitant

If no surviving spouse, child/grandchild must be considered financially dependent for RSP to become a refund of premiums.

Contributions to own plan cease at date of death, but spousal contributions may continue to be made by estate if there is RSP room.

RC 4177 Death of RSP Annuitant
Contributing to an RSP
Death of RIF annuitant
RC 4178 Death of RIF Annuitant

Children/grandchildren must be dependent because of physical or mental infirmity

Death of a TFSA holder
Final returns
T4011 Preparing returns for deceased persons
Final return information page
Self-employed / accrual method S. 9

Accrual includes cost of executor in order to earn business income,exception - farming/fishing

Deemed disposition summary
Deemed disposition on death S. 70(5),(5.1) & (5.2)

Capital property 70(5)

Eligible capital property 70(5.1)

Resource property 70(5.2)

IT 120 Principal Residence
Optional returns
Optional returns Chart 1
IT326 Returns of deceased as 'another person'
Pension splitting

Do you qualify?


CPP Death Benefit is never reported on the T1 Final - either income to the person in receipt or to the estate on the T3 Estate return.

Other pensions
Retiring allowances

May be reported on T1 Final, by beneficiary if received or by T3 Trust return

Spouse trusts
Spousal Trust S. 70(6)
Tainted spousal trust S. 108(4)
IT305 Testamentary spouse trusts
Elections in year of death
Death Benefits Line 130

Ensure that corporation has set out the right in a resolution in the minute book to pay death benefits before employee dies / $10,000 exemption s. 104(28)

Death Benefits IT508
Capital loss in first year of estate S. 164(6)

Reg 1000 - election by filing deadline for T1 final return and filing deadline for first T3, made by letter marked S. 164(6) election and include amounts, details with and without election.

Election loss/employment (Stock option) S.164(6.1)

Exercise or disposition in first year of estate at less than value on T1 Final

Reserve - capital gain S. 72(2)
T1079 Election on principal residence

Filed with T3 return / includes specified beneficiary 

T1255 Designation of Principal Residence

 See IT 120

Non residents
International/NR taxes - individuals
Non resident beneficiaries of trusts
Penalties specific to non residents
Payment of tax
Election to defer payment of tax S. 159(5)

Ten equal annual instalments with acceptable security and Form T2075

Election form for deferral T2075
Penalties and interest

Late filed returns 5% plus 1% per month (maximum 12 months) where a demand to file and late filing penalty in previous three returns, 10% plus 2% per month, maximum 20 months under s. 162(2).  See S. 238 for fines from $1,000 to $25,000 or both fines and imprisonment of up to 12 months. Civil penalties, greater of $1,000 and 50% of the tax avoided or falsely refunded.



Spousal rollover-opt out of automatic rollover
Within 36 months opt out s. 70(6.2)
Transfers after death due to divorce (IT325 p.23)
Farming overview
Farm property transfer to child
IT349 Intergeneration tsf farm property
Flow thru NISA2 AGR-1 to spouse S.104(14.1)
Disability and infirmity
Preferred beneficiary election IT 394

For a trust's taxation year that ends after 1996, a preferred beneficiary under a trust generally means an individual beneficiary who is eligible for a disability tax credit or an adult beneficiary for whom a dependant tax credit can be claimed by another individual because of the beneficiary's mental or physical infirmity. However, for a trust's taxation year that ends before 1997, a preferred beneficiary is generally restricted to an individual beneficiary who is eligible for a disability tax credit.

Foreign reporting forms
Planning ahead
Planning your will
Giving to charity: make informed choices

Tax Savings  / Donating securities - capital gains tax on eligible amount of publicly traded securities donated to registered charities

Donations on Death
Exchangeable securities - zero inclusion Feb 2008
CAGP Resources
Intervivos gifts-capital property/individual/trust

Sectional references for all kinds of transactions

Canadian Bar Association -BC Branch

Checklist: your duties as an executor

Public Guardian & Trustee BC

Plan ahead so the province/territory isn't required to administer your estate.   If you die without a will (intestate) here's what happens to your assets http://www.trustee.bc.ca/services/estate/estate_admin.html

Public Guardian - FAQ on Estates
Law Society of BC - Checklist
Have you been disinherited?
CICA toolkit for business owners / estate planning
Passing Accounts / Estate Accounting
Clearance Certificate Form TX19
When the Public Trustee is Commitee
Committee reporting - BC Public Trustee
Patients Property Act Rules BC
Executor & Trustee Fees - a blog

Blog worthy of subscription...

Report/ Trustee Remuneration and Trustees's Accts

Select Download to load the PDF of the report /  Review other papers on a variety of legal topics

Beneficiary release / Passing Accounts
CPA Resource
IRS FAQ on Estate Taxes (USA)
IT 286 Trusts - Amounts Payable

Mutual fund trusts.. (distinct from Mutual Fund Corporations)




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