Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:What are the tax consequences of the estate of a deceased employee becoming entitled to receive retroactive salary by virtue of a collective agreement being signed after the employee's date of death?
Position: Not subject to tax, CPP or EI; although payment of interest would be taxable.
Reasons: Similar to pay equity positions stated on our internet site.
XXXXXXXXXX J.D. Brooks
2003-001883
June 3, 2003
Dear XXXXXXXXXX:
This is in reply to your enquiry of May 15, 2003, in which you requested our views on the tax consequences of the estate of a deceased employee becoming entitled to receive retroactive salary by virtue of a collective agreement being signed after the employee's date of death. We acknowledge our conversation (Brooks/XXXXXXXXXX) of May 28, 2003.
Confirmation of the tax implications of transactions is given only in reply to an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5. While we are unable to comment on the particular situation described in your letter, the following general comments may be of assistance to you.
Where a collective agreement is signed after the date of death of an employee and retroactive pay is subsequently paid, the retroactive pay is not subject to tax (reference: Chart 3 of the pamphlet, Preparing Returns for Deceased Persons [T4011]).
Similarly, the retroactive pay is not pensionable or insurable and thus there should be no deductions for CPP or EI (reference: Q5 of Part 8 of "Income Tax Information About Pay Equity Employment Income ..." posted on our internet site at www.ccra-adrc.gc.ca).
If any interest is paid, it is subject to tax (reference: Q2 of Part 8 of "Income Tax Information About Pay Equity Employment Income ..." posted on our internet site).
Since the retroactive pay is payable to the estate of the deceased person, the cheque should be made out accordingly. If the estate has already been administered, the executor can still cash the cheque as executor and distribute the funds according to the deceased person's will.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of the Circular, the above comments do not constitute an income tax ruling.
Yours truly,
Theresa Murphy
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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