Subsection 70(1) - Death of a taxpayer
Administrative Policy
21 August 1991 T.I. (Tax Window, No. 8, p. 10, ¶1404)
Interest on most compound debt instruments and term deposits accrues on a daily basis, with the result that on the holder's death, the accrued interest is required to be included in income under s. 70(1) rather than s. 70(2) or (3). However, where the instrument is a compound interest Canada savings bond, only interest accrued on the bond after the November 1 preceding the date of death is required to be included in the return filed under s. 70(1). The interest that has accrued prior to that date may be treated as a "right or thing".
Subsection 70(2) - Amounts receivable
Cases
Crown Trust Co. (McArdle Estate) v. MNR, 65 DTC 5176, [1965] CTC 295, [1965] S.C.R. 723
S.64(2) of the pre-1972 Act did not apply to pension benefits which were paid to the estate of the deceased because the amounts could only be definitely ascertained upon the occurrence of the deceased's death, i.e., the amounts could never become payable in the lifetime of the deceased.
Administrative Policy
9 March 2015 T.I. 2012-0469761E5 F - Rights or things
A corporation wholly-owned by a discretionary non-testamentary trust (with an individual, his spouse and children as beneficiaries) declares a dividend, with the trustees then resolving that the trust will pay the dividend on receipt to the individual – who dies before the dividend is received by the trust. The dividend when received is paid to the estate. CRA stated (TaxInterpretations translation):
[A]n amount which a taxpayer has the right to receive at the moment of his or her death and whose value is determinable can constitute a right or thing under subsection 70(2) even if it is not payable ["exigible" – also translatable as "due"] at the moment of death because it is subject to a condition.
…In this case, it would be necessary to examine the trust deed and the trustees' resolution in order to determine if, at the moment of death, the individual had a right to receive an amount from the trust or if the existence of such a right was subject to an unsatisfied condition, namely the receipt by the trust of a dividend declared by the corporation.
21 December 1995 T.I. 952603 (C.T.O. "Rights and Things")
A dividend declared by a corporation within a month following the end of its fiscal period that is payable 14 months after the end of that fiscal period and that is equal in amount to three times the corporation's refundable dividend tax on hand at the end of the fiscal period in which the dividend is declared, will not qualify as "rights or things" for purposes of s. 70(2) where the individual shareholder dies within three months following the declaration of the dividend, because the determination of the refundable dividend tax on hand would involve income realization (or losses) during the period subsequent to the individual's death.
93 C.R. - Q. 38
An amount in a taxpayer's net income stabilization account fund no. 2 on hand at the time of her death will not be a right or a thing to which s. 70(2) or (3) may apply.
9 January 1992 T.I. (Tax Window, No. 15, p. 23, ¶1690)
Old age security benefits which the estate is entitled to apply for and which would have been payable to the deceased had an application been made prior to death will be considered to be rights or things.
91 C.R. - Q.27
An enforceable claim to unpaid management bonus would constitute a "right or thing". However, where the employer had a contractual obligation to pay a bonus annually, but the bonus for the period had not been declared as of the date of death, the amount would be considered to be periodic remuneration taxable under s. 70(1).
12 December 1989 Memorandum (May 1990 Access Letter, ¶1207)
An unexercised employee stock option held by an employee at the time of his death is not a "right or thing" because it is a right to purchase a share at a specified price, and not a right to an amount which would have been included in income on exercise or disposition of the right.
18 October 89 Meeting with Quebec Accountants, Q.14 (April 90 Access Letter, ¶1166)
The entitlement of a deceased employee to receive amounts under a leave of absence program constitutes a right or thing for purposes of s. 70(2).
81 C.R. - Q.16
S.70(2) generally will be applicable to a funded deferred compensation arrangement, whereas it will not generally be applicable to a lump sum payment out of an unregistered pension plan.
Articles
Thomas McCallum, "The Final Tax Return", CGA Magazine, January-February 2012, p.48
Non-technical discussion of opportunities for using separate return.
Innes, "If the Tax Treatment of Accrued Gains on Inventory at Death", Estates and Trust Journal, Vol. 12, 1992, p. 122.
Subsection 70(3) - Rights or things transferred to beneficiaries
Cases
Tory Estate v. M.N.R., 73 DTC 5354, [1973] CTC 434 (FCA), briefly aff'd 76 DTC 6312, [1976] CTC 415 (SCC)
A non-resident beneficiary of the Tory Estate ("Mrs. Denton"), who was entitled to a cash legacy of $90,000, purchased accounts receivable of $483,350 owing to the estate in consideration of (1) her releasing the estate from its liability to pay her $90,000 and (2) her paying $380,000 to the estate. It was held that "the words 'distributed to the beneficiaries' clearly restrict the value of the rights or things to be conveyed to each beneficiary to the amount of the bequest to which he is entitled", and that the meaning of the word "transferred" was similarly coloured. Mrs. Denton accordingly acquired $393,350 (or $483,350 - $90,000) of the accounts receivable as a purchaser for value, rather than as a beneficiary, and that amount accordingly was not excluded from the income of the estate by virtue of s. 70(3).
Subsection 70(5) - Capital property of a deceased taxpayer
Cases
Nussey Estate v. The Queen, 2001 DTC 5240, 2001 FCA 99
The two sons of the taxpayer had transferred to him shares of a family corporation. The shareholders agreement provided that, on the death of a shareholder, his shares were deemed to have been redeemed by the company on the day preceding that of death.
The Court affirmed the finding of the Tax Court Judge that the deemed redemption provisions in the agreement did not effect a retroactive disposition of the shares the day before the taxpayer's death, nor was the Court persuaded that the sale of the shares to the taxpayer was void for a mistake because the sale did not have one of its intended tax consequences.
The Queen v. Mastronardi Estate, 77 DTC 5217, [1977] CTC 355 (FCA)
The taxpayer died suddenly and without warning of a heart attack. Shares that the deceased held in a company which held a term life insurance policy on his life were valued for purposes of s. 70(5) excluding the proceeds of the life insurance policy because it was held to be inappropriate to equate the time "immediately before" death with the instant of death.
See Also
Bueti v. The Queen, 2015 TCC 265
Mrs. Bueti, who was entitled to receive 1/3 of the residue of estate of her father (who died in August 1999), was found to have purchased, as joint tenant with her husband, a property (a house) included in her father estate for consideration of $50,000, which was less than its fair market value at the time of the July 2000 purchase.
In finding that s. 70(5)(b) did not apply to deem the house to have been acquired for its higher fair market value, Owen J found (after emphasizing, at para. 53, that the property was not devised in specie to any beneficiary) (i) that under Ontario law the property became vested in the executors and not the beneficiaries including the taxpayer (noting, at para. 56, that 909403 Ontario Ltd. v. DiMichele, 2014 ONCA 261 "confirmed that an entitlement to the residue of an estate under a will does not amount to a property interest in specific estate assets,") so that the property was acquired by the executors rather than the taxpayer (para. 59), and (ii) that the transfer to the taxpayer and her husband (who was not a beneficiary) as joint owners was inconsistent with the property being acquired qua beneficiary. S. 248(8)(a) was not discussed.
Accordingly, a gain on a subsequent disposition of the property (by gift in 2004, after it had become a rental property) was based on the property's lower actual cost.
Nauss v. The Queen, 2005 DTC 1370, 2005 TCC 488
In 1997 the taxpayer and his sister inherited from their grandmother a remainder interest in a house. with their 70-year old mother inheriting a life interest. In 2002 while the mother was still alive, the house was sold at a gain.
The 1997 valuation of the life interest of the taxpayer and his sister was determined as the present value of residential rental rates for the house over the life expectancy of the mother, and the 2002 valuation of the life interest was determined as its value in 1997 escalated in proportion to the increase in value of the whole property, and then proportionately reduced to reflect the decrease over the five years in the life expectancy of the mother from 10.02 years to 12.44 years. The remainder interest was valued in 1997 (for purposes of determining its adjusted cost base) and in 2002 (for purposes of determining the proceeds of disposition) by taking the residual values.
Anderson Estate v. The Queen, 95 DTC 758 (TCC)
The sister-in-law of the deceased who had lived with him for more than 50 years and worked on his farm venture jointly with him for most of that period without any pay, was found to have an inchoate interest in the farm by virtue of a constructive trust. Accordingly, a transfer to her of a portion of the farm lands following an action brought by her against the estate was found not to entail a disposition of such property by the estate, nor was there a deemed disposition of property under s. 70(5).
Administrative Policy
12 December 2014 T.I. 2013-0511391E5 F - Deemed disposition of capital interest in personal trust
The sole beneficiary of an inter vivos trust (the "Trust"), whose interest under the Trust had vested indefeasibly, died, as a result of which his capital interest passed as part of his estate to his beneficiary.
After noting that the deceased was deemed on death to have disposed of his capital interest for its fair market value, CRA stated that s. 107.4(4) "would apply to ensure that the FMV of the capital interest…was at least equal to the FMV of the Property of the Trust…." Furthermore, s. 70(5)(b) "applied so that the estate was deemed to have acquired the capital interest at its FMV immediately before the death."
Respecting the situation where the capital interest of the individual beneficiary had not yet irrevocably vested so that it was extinguished on his death, CRA stated that "we are not in a position to confirm that this interest would have no value immediately before the death" as this would turn on "an examination of all the facts and the exercise of judgment of a professional valuator."
24 May 2012 T.I. 2011-0429991E5
Mr. A engages in an estate freeze transaction in Year 1 in which all his common shares are exchanged in a s. 86 reorganization for preferred shares whose terms contain a price adjustment clause. Following his death in Year 16 years later, CRA determines that the redemption value of these preferred shares at the time of their issuance was less than the fair market value of the common shares.
If the price adjustment clause was "valid," i.e., it complied with IT-169 including that the valuation method used in Year 1 was "fair and reasonable," then the redemption amount of the preferred shares would be automatically increased retroactively to Year 1, thereby increasing the fair market value proceeds of the deemed disposition of those shares in Year 16 on the death of Mr. A. If the price adjustment clause was not valid, it "could be argued" that there was a misrepresentation that opened up Year 1 to reassessment under s. 86(2).
28 November 2010 CTF Roundtable Q. , 2013-0487431C6
The questioner referenced the CRA statement at the 2009 British Columbia Tax Conference that, in the context of an estate freeze of a Canadian-controlled private corporation, where the freezor, as part of the estate freeze, keeps controlling non-participating preference shares in order to protect his economic interest in the corporation, CRA generally accepts that no premium should be attributed to such shares in determining their fair market value under s. 70(5), and asked whether this position also applies for the purposes of s. 104(4)(a), e.g., re the deemed disposition arising on the death of the spouse who is the beneficiary of a spousal trust. CRA stated:
...as was noted, CRA generally will ignore any premium that could be attributed to controlling non-participating preference shares, for purposes of subsection 70(5)...where the shares were held to protect the deceased's economic interest in the corporation....[W]e have not had the opportunity to give full consideration to whether the above position should apply for purposes of [s. 104(4)(a).]
4 October 2002 T.I. 2002-0154725
On the death of Mrs. X, a life interest in a residence was received by her surviving husband (Mr. X) and the remainder interest by her daughter (Ms. A). S. 70(5) applied to the remainder interest gifted to Ms. A and s. 70(6) applied to the life interest gifted to Mr. X.
Mr. X was deemed to dispose of his life interest for its fair market value immediately before his death. Such a deemed disposition likely would result in a capital loss, but it would be deemed to be nil by virtue of s. 40(2)(g)(iii) respecting personal-use property.
Respecting valuation, CRA stated:
the FMV of a remainder interest in a real property at a particular time is equal to the FMV of that real property minus the FMV of the life interest therein. The calculation of the FMV of the life interest would usually be based on the following elements: FMV of the real property, a reasonable rate of interest, life expectancy of the beneficiary of the life interest at the date of transaction, and any other factors relevant to the specific case… .
11 February 2002 T.I. 2000-0004416
Where a Canadian resident individual inherits the shares of a publicly-traded company from a foreign relative, those shares will have a nil cost amount to him under s. 107(2)(b). Although under ss.70(5)(a) and (b) a deceased taxpayer is deemed to have disposed of capital property at fair market value and the person acquiring such property as a consequence of the taxpayer's death is deemed to have acquired them for the same amount, "in our view, a non-resident individual that is not subject to taxation in Canada, pursuant to subsection 2(3) of the Act, is not subject to the deemed disposition rules in paragraph 70(5)(a). Consequently, we would not expect the provisions of paragraph 70(5)(b) to apply to an estate that acquired property as a consequence of a non-resident person's death ... ."
May 1999 CALU Conference No. 9908430 Q. 8
Where a shareholder holds a special share (in addition to common shares of the corporation) with a nominal redemption value, and the shareholders agreement provides that upon the death of a shareholder, any excess of life insurance proceeds received by the corporation over and above the stipulated redemption price of the common shares shall be used to pay a dividend on that special share, then notwithstanding s. 70(5.3)) which deals with the fair market value of all the shares of a corporation rather than the allocation of that fair market value among classes, the right to receive that special dividend on a special share may cause that share to have a fair market value in excess of $1.
3 March 1995 T.I. 942991 (C.T.O. "Transfer on Death of Jointly-Owned Property")
The taxpayer's representative argued that because each joint tenant has an interest in the whole of the property, when the first joint tenant dies the surviving tenant does not acquire anymore property. In rejecting this interpretation, RC referred to the broad definition of property and concluded that s. 70(5) applies to deem the first to die of two joint tenants to have transferred his joint interest immediately before this death for proceeds equal its fair market value.
29 July 1992 T.I. 5-921406
Where a taxpayer died in the Province of Quebec before 1989 in possession of property subject to a usufruct, s. 70(5)(c) would apply to the person who acquired the naked ownership of the property subject to the usufruct.
90 C.R. - Q54
The ratio in s. 70(5)(b) which applies for determining a beneficiary's deemed cost of each depreciable asset in a class also is the ratio which governs the determination of the proceeds for capital gains purposes under s. 70(5)(b).
88 C.R. - Q49
Neither s. 69 nor s. 70(5) applies to an accrual basis taxpayer when under the terms of his will a non-capital asset is transferred upon his death.
86 C.R. - Q56
A beneficiary to whom a mortgage receivable with a value less than its principal amount is distributed by the executors will realize a capital gain when it is paid off.
IC 89-3 "Policy Statement on Business Equity Valuations"
Discussion of the circumstances in which a buy-sell agreement will be considered determinative of value for purposes of s. 70(5).
Articles
Brian Nichols, "Double Taxation 101", Tax Topics, No. 1570, 11 April 2002, p. 1
Comparison of Pipeline Strategy With S.164(6) Strategy.
Cadesky, "Succession of the Family Business", Estates and Trusts Journal, 1994, Volume 13, p. 219.
Subsection 70(5.2) - Resource property and land inventory
Administrative Policy
20 June 2014 T.I. 2014-0532221E5 - Disposition of Canadian resource property
As a result of a lease of subsurface rights to an oil company, Mr. A received monthly royalty payments (the "Royalty Payments"), which continued to his estate.
Provided that the royalty qualified as a Canadian resource property (under para. (d)), the deemed fair market value proceeds of the Royalty received by Mr. A immediately before death under s. 70(5.2)(a) represented proceeds of disposition of a CRP, which would have been deducted from his CCOGPE balance, with any resulting negative amount being included in his income pursuant to element F of the s. 66.4(5) definition.
Under s. 70(5.2)(b), the Estate would acquire the Royalty at its fair market value immediately before his death and this amount should be added to its CCOGPE balance, so that it would be entitled to 10% deductions under s. 66.4(2). The Royalty Payments will be included in the Estate's income under s. 9 or 12(1)(g).
Subsection 70(5.3) - Fair market value
Administrative Policy
20 September 1993 T.I. 932127 (C.T.O. "Life Annuities")
Although a life annuity is a life insurance policy which is issued or effected upon the life of a person, it is not a policy under which the life of the person is insured. Accordingly, RC question whether s. 70(5.3) would have application with respect to a life annuity.
84 C.R. - Q.54
S.70(5.3) is not applicable on a sale of shares to a non-arm's length person, and the proceeds of the life insurance policy will be a factor in the determination of the fair market value of the shares at that time.
Subsection 70(6) - Where transfer or distribution to spouse or spouse trust
Cases
Greenwood Estate v. The Queen, 94 DTC 6190 (FCA)
The deceased taxpayer agreed to sell shares to his three sons for $800,000, payable by a promissory note, with such sale to be completed within 30 days of the appointment of his executors. His will provided for the transfer of the assets of the residue of his estate to a spousal trust. Because at the time of the taxpayer's death the shares were subject to the agreement, the property that vested indefeasibly in the spousal trust was the promissory note and not the shares. Accordingly, the spousal rollover was not available. Robertson J.A. also quoted the statement of the trial judge that "indefeasible vesting requires that the person in whom the property is vested have the right to determine whether or not the property will be retained by him or her or disposed of to another." He went on to note that here, the agreement allowed for no discretion on the part of the vendor or the three sons.
Van Son Estate v. The Queen, 90 DTC 6183 (FCTD)
The deceased taxpayer bequeath his 49% shareholding in a private company to his surviving wife. Joyal J. found that under a buy-sell agreement of the taxpayer with the majority shareholder, there was an obligation imposed on the majority shareholder to buy the estate's shares on the taxpayer's death, but there is no obligation on the estate to sell those shares. Because on the taxpayer's death the shares were not subject to an obligation to sell, the indefeasible vesting requirement was met.
Hillis v. The Queen, 83 DTC 5365, [1983] CTC 348 (FCA)
Per Clement, D.J.: Only the property of the intestate taxpayer's estate to which his widow was entitled pursuant to the Intestate Succession Act (Saskatchewan), not the estate assets which she became entitled to over 2 years later as a result at that later time of (a) disclaimers by other beneficiaries and (b) a relief order pursuant to the Dependants' Relief Act (Saskatchewan) (which order had retroactive effect to the time of the taxpayer's death only for the purposes of that statute), vested in her within the requisite time. It was reasonable for her to wait 41 months from the time of the intestate's death to commence these Federal Court proceedings to establish when vesting occurred, in light of a 29-month delay of the Minister in reassessing.
Per Heald, J.: Parliament's intention was that provincial law should govern the determination of when, for the purposes of S.70(6), the vesting occurred and the relief order accordingly vested the entire estate in the widow, this vesting being retroactive to the time of the taxpayer's death. The delay in obtaining this order was reasonable, given that it was due to the unsatisfactory handling of the estate by an accountant.
Katz Estate v. The Queen, 76 DTC 6377, [1976] CTC 633 (FCTD)
Since the deceased is deemed to have disposed of depreciable assets immediately before the time of his death, his representatives are precluded from claiming depreciation for his terminal year in computing his income from property, regardless whether his taxation year is regarded as ending on December 31 or at the time of his death.
See Also
Husel Estate v. The Queen, 94 DTC 1765 (TCC)
A transfer of shares to the wife of the deceased in consideration for cash and set-off of debts owing to her by the estate occurred pursuant to a purchase transaction rather than as a consequence of the death of the deceased. Accordingly, the rollover in s. 70(6) was not available.
May Estate v. MNR, 89 DTC 534 (TCC)
Following litigation in the Saskatchewan Surrogate Court, an order was made vesting in the deceased's widow nine one-quarter parcels of land. These lands vested indefeasibly in her at the time the order was pronounced by the court, notwithstanding that before the order was issued, an agreement was concluded giving next-of-kin a right of first refusal with respect to three of the parcels.
The Queen v. Green Estate, 78 DTC 6324, [1978] CTC 501 (FCTD)
The testatrix provided in her will that the residue should be divided among her children then alive when there should no longer be any child of hers living and under the age of 21. It was held that the residuary gifts to her (minor) children were contingent, and that the residue accordingly could not be established to have "vested ... indefeasibly" in the children within 6 months of the testatrix's death within the meaning of s. 7(1)(c) of the Estate Tax Act.
Administrative Policy
16 June 2014 STEP Roundtable Q. , 2014-0523091C6
Can s. 70(6) apply to a transfer by a taxpayer both to his or her spouse and a transfer to his or her common law spouse? CRA stated:
…It is possible that a taxpayer could have a spouse and a common-law partner at the same time, for purposes of the Act. For example, in document 2010-037390117 the CRA addressed a scenario where a taxpayer was legally separated but not divorced and had a common-law partner at their death. We were asked, in part, whether paragraph 70(6)(a) would apply to two properties of which one property was bequeathed to the deceased taxpayer's spouse (separated but not divorced) and another property was bequeathed to the deceased taxpayer's common-law partner. Provided all the conditions in subsection 70(6) are met in respect of the deceased taxpayer and the spouse or common-law partner, the subsection would apply to the property transferred to each of the spouse and common-law partner.
11 January 2012 STEP Roundtable Q. , 2011-0402291C6
Where a taxpayer dies intestate, then provided the property of the deceased is distributed to the beneficiaries in accordance with the shares specified in the applicable provincial law of intestacy, such property will be considered to have been distributed as a consequence of the deceased's death per s. 248(8) even if each type of property is not distributed on a pro rata basis among the beneficiaries. For example, it would be permissible for a surviving spouse to receive, in accordance with such provincial law, all of an RRSP of the deceased that was included in the estate, in order to access the s. 60(l) rollover. The answer implied that appreciated capital property also could be allocated exclusively to a surviving spouse.
12 March 2012 T.I. 2010-0378451E5
Para. 8 of IT-449R (archived) re the effect of a buy-sell agreement on the "indefeasibly vested" requirement is still supportable.
8 October 2010 Roundtable Q. , 2010-037191
In a situation where, in order to pay debts of the deceased, the executor of an estate sells a portion of the shares which were bequeathed to the testator's partner, the shares are not "transferred" to the spouse for the purposes of s. 70(6), and are therefore not eligible for a s. 70(6) rollover.
17 December 1996 Memorandum 962572 (C.T.O. "Remarriage Clause & Def'n of Spousal Trust")
Where a will provided that the widow was entitled to receive the income of the estate but that her entitlement was "to be terminated upon her death or remarriage", and it is proposed that a court order be obtained removing the remarriage clause, RC will accept that the property of the estate vested indefeasibly in the spouse's trust within the 36-month period only if the court order is made within 36 months of the date of death.
14 November 1996 T.I. 962734
Before referring to Peardon v. MNR, 86 DTC 1045, RC in its summary stated that "lending or investment of trust property to a non-spouse on 'commercial' terms does not taint the spousal trust but if the terms of the trust permit the lending of trust property to a person other than the spouse on terms more favourable than that [sic] which would otherwise be available to that person commercially, the trust would not be a spousal trust, even if the trustees did not make such a loan."
5 May 1995 T.I. 950098 (C.T.O. "Assumption of Liabilities")
A transfer of shares of a private corporation made to the surviving spouse after her agreement to assume liabilities of the estate and provide security therefor would not be considered a transfer "under or as a consequence" of the terms of the will of the taxpayer as contemplated in s. 248(8)(a), but, rather, as the result of the agreement between the executors and the surviving spouse.
17 August 1994 T.I. 941053 (C.T.O. "Trusts - 'As a Consequence of the Taxpayer's Death'")
A discretion accorded by the will to the executors to determine the particular assets to be distributed to the spouse or spousal trust of the deceased would not, by itself, cause the rollover in s. 70(6) not to be available.
30 November 1993 T.I. 932716 (C.T.O. "Vested Indefeasibly")
In determining whether a by-sell agreement in a shareholders' agreement would result in shares not be considered to vest indefeasibly in the spouse, it would be necessary to determine if any of the terms of the shareholders' agreement could be considered a condition subsequent or a determinable limitation set out in the grant, as discussed in Boger Estate, 93 DTC 5276 (FCA). [Further discussed in 25 January 1994 T.I. 933702 (C.T.O. "Vested Indefeasibly")]
22 November 1991 T.I. (Tax Window, No. 13, p. 7, ¶1632)
A designation under s. 104(13.1) or (13.2) will not affect the status of a spousal trust.
22 August 1991 T.I. (Tax Window, No. 8, p. 19, ¶1406)
The spouse is entitled to receive all of the income of the trust only if the sole discretion to receive all or part of the income is in the spouse's hands. However, the spouse may indicate in writing a desire not to receive all or part of it without disqualifying the trust.
15 April 1991 T.I. (Tax Window, No. 2, p. 23, ¶1202)
Where a bequest to a surviving spouse is made in addition to the surviving spouse's entitlement under the Family Law Act (Ontario), two valid spouse trusts may be created.
3 December 1990 Memorandum (Tax Window, Prelim. No. 2, p. 15, ¶1077)
An apartment building and the underlying land generally can be treated as two separate properties, with the result that s. 70(5) can be applied to the land, and s. 70(6) to the building.
14 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 10, ¶1042)
Where a deceased taxpayer's surviving spouse receives property from the estate pursuant to his or her equalization right, the property will be considered to be transferred as a consequence of the death of the deceased. However, where the surviving spouse reaches a settlement with the executors and property is transferred to the surviving spouse in consideration for a release of his or her rights to make a claim under the Family Law Act for an equalization and net family property, the rollover is not available.
14 May 1990 T.I. (October 1990 Access Letter, ¶1466)
Where the surviving spouse has the right to put the shares of the deceased to the other shareholders, and the other shareholders have a call right, RC generally considers the shares to have become vested indefeasibly in the spouse if they are transferred to her before either option is exercised.
2 April 1990 T.I. (September 1990 Access Letter, ¶1420)
A clause in a will empowering the executors determine whether a particular receipt was on income or capital account serves only to facilitate the administration of the estate and does not give arbitrary powers to the executors. Accordingly, the trust is not tainted from being a spouse trust.
19 April 1990 T.I. (July 1990 Access Letter, ¶1324)
After reconsidering its technical interpretation of 7 December 1989, RC was of the view that a designation under s. 104(13.1) or (13.2) and the payment of the resulting taxes out of the trust income, will not affect the status of a trust described in s. 70(6)(b) or 104(4)(a).
7 December 1989 T.I. (May 1990 Access Letter, ¶1225)
Where a trust pays the tax liability out of trust income resulting from an s. 104(13.1) designation, the requirements of s. 70(6)(b)(i) will not be met. However, the payment of the tax out of taxable capital gains of the trust will not in and of itself preclude the trust from qualifying.
3 November 89 T.I. (April 90 Access Letter, ¶1173)
A spousal trust will be created where the will directs the establishment of a trust for a spouse that leaves total discretion to the executor to determine the total value of the properties to be transferred to the trust, and the specific properties to be transferred.
84 C.R. - Q.29
Re usufructs.
80 C.R. - Q.42
If at the time a widow acquires shares under her husband's will, she is bound under a buy-sell agreement to sell them, there is no indefeasible vesting.
IT-449R "Meaning of 'Vested Indefeasibly'"
IT-305R3 "Establishment of Testamentary Spouse Trust"
Subsection 70(6.2) - Election
Administrative Policy
12 June 2012 STEP CRA Roundtable Q. , 2012-0442921C6
A s. 70(6) election cannot be made in respect of a fractional interest in a property For these purposes each share of a corporation, and all of the taxpayer's interest in a partnership, constitutes a single property of the taxpayer. As each share is a separate property, a s. 70(6.2) election can be made for any number of the deceased taxpayer's shares; whereas it cannot be made with respect to a portion of the deceased taxpayer's partnership interest.
91 C.R. - Q.43
A legal representative can elect with respect to a portion of the shares, and a formal written statement, although preferred, is not required. An amendment to or a revocation of an election may be granted where it can be demonstrated that the original election causes unintended tax consequences, and there is no retroactive tax planning involved.
6 March 1991 T.I. 5-910239
RC allows election to be made in respect of a fraction of the total number of identical shares owned by the deceased taxpayer.
90 C.R. - Q55
The representative may not elect with respect to part of a property.
Subsection 70(9) - When subsection (9.01) applies
Cases
The Queen v. Boger Estate, 93 DTC 5276 (FCA)
The will of the deceased taxpayer devised a life interest in some lands (the "home quarter") to his wife and the residue of his estate (including some additional lands) to his four children. 2 1/2 years after his death his wife obtained a court order pursuant to the Family Relief Act (Alberta) granting her the fee simple in the home quarter. At the same time, the additional lands were sold with the consent of the adult children and the proceeds distributed to them.
In finding that there had been an immediate indefeasible vesting of the additional lands in the children Joyal J. noted that no condition or limitation was imposed in the will itself on the devise of the residue and found that such devise was sufficient to constitute a "transfer" of property in the additional lands to the children notwithstanding that the lands never were conveyed to them.
In rejecting a submission of the Crown that the personal representative of the estate must take a positive action to "transfer or distribute" legal title or physical possession before the beneficiaries under the will could be said to have obtained any property rights, Heald J.A. found that beneficial entitlement in the real estate arose on death and not at some later date pursuant to s. 3 of the Devolution of Real Property Act (Alberta). In addition, there was an immediate vesting of the real property because there was no condition precedent to be fulfilled before the devise took effect and there were no prior interests in existence; and the vested interest of the children was not defeasible since it was not subject to any condition subsequent contained in the will.
See Also
Bouchard Estate v. MNR, 93 DTC 1511 (TCC)
In finding that 50% of the lands of the deceased were used in the business of farming immediately before his death, rather than 10% as reassessed by the Minister, Gauron TCJ. stated (p. 1515) that he did not believe:
"That in interpreting subsection 70(9) one must consider only the part of the land that was effectively used for tillage of the soil or other agricultural operations immediately before the taxpayer's death."
Lewis v. MNR, 89 DTC 291 (TCC)
In his will a testator gave his wife the rents and profits from a farm until one of his grandsons reached the age of 20, at which time the farm was to be conveyed to them. It was held that at the time of the testator's death the land vested in interest (albeit not in possession) in his grandchildren.
Administrative Policy
81 C.R. - Q.37
Where property is held under the terms of a will on trust for a child until he attains a specified age, or to his estate if he does not attain that age, then the property is regarded for purposes of subsections 70(9), (9.2) and (9.4) as having vested indefeasibly in the child even though it, in fact, is vested in a trust for the child.
Subsection 70(9.4)
See Also
McCreath Trust v. The Queen, 82 DTC 6294 (FCA)
It was held that the beneficial interest of 4 children in the corpus of a trust which had been established by her 7 years before her death, arose on her death (that being the relevant test in S.3(1)(j) of the Estate Tax Act), where the trust agreement provided that the trustee shall "on the death of the Settlor if she shall die leaving issue her surviving ... hold the trust fund in trust for the issue of the Settlor who shall be living at her death ...".
Subsection 70(9.01) - Transfer of farming and fishing property to child
Administrative Policy
25 February 2015 T.I. 2014-0534681E5 F - Interaction of subsections 69(11) and 70(9.01)
Does s. 69(11) apply where s. 70(9.01) applies? CRA responded (TaxInterpretations translation):
Whether or not the taxpayer's legal representative elects, subparagraphs 70(9.01)(a)(i) and 70(9.01)(b)(i) both provide that that section 69 does not apply to the taxpayer or to the child in respect of the property. Consequently,…section 69, which includes subsection 69(11), will not apply in a situation where subsection 70(9.01) has application.
Subsection 70(10) - Definitions
Share of the Capital Stock of a Family Farm Corporation
Administrative Policy
11 February 2014 T.I. 2014-0517611E5 F - Actions d'une société agricole familiale
In year 1 Father purchased Opco, in year 5 he transferred his shares equally to Child 1 who actively explanted the farming business of Opco along with Father (including after his death in Year 15), and to Child 2 who did not so participate. In Year 18 Child 2 transferred his or her shares to a holding company (Holdco), and in Year 20, wishes to transfer the shares of Holdco to a son. At all relevant times the assets of Opco were used in its farming business.
In finding that the shares of Holdco were shares of the capital stock of a family farm corporation, CRA stated (TaxInterpretations translation):
Father used the property of Opco in carrying on a farming business in Canada in which he was engaged on a regular and continuous basis for 15 years out of a period of 21 years. We are of the view that the property of Opco was used principally in the course of carrying on a farming business by an eligible person.
24 December 2012 T.I. 2012-0457881E5 - Share of a capital stock of a family farm
After stating that the comments in 2000-0011595 were still valid, CRA stated:
CRA would take into account the use of a particular property by a person who was an eligible person in respect of that family farm corporation during a period of time where such property was owned or rented by such eligible person(s) before it was acquired by the family farm corporation.
1 March 2000 T.I. 1999-001137
A corporate partner of a partnership carrying on a farming business would be considered to be carrying on that business.
26 March 1991 T.I. (Tax Window, No. 1, p. 17, ¶1171)
Although whether a member of the board of directors of a corporation is to be considered to be actively engaged in the business is a question of fact, attending three to four meetings a year and being involved only in the major decisions concerning the management of the family farm does not satisfy the requirement.