5 February 1996 External T.I. 9519335 - age tax credit and tax under 180.2 on separate returns

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

In the year of death, an ordinary return for the taxpayer must be filed. The executor, on behalf of the taxpayer, may also be eligible to file returns under subsection 150(4), 70(2), and/or paragraph 104(23)(d). 1) The first issue is whether the net income for the purpose of the calculation of the tax under section 180.2 includes the combined net incomes from all returns filed in the year of death or only the net income of each return. 2) The second issue is whether the income for the purpose of the calculation of old age tax credit in subsection 118(2) includes the combined net income from all returns filed in the year of death or only the net income of each return.

Position TAKEN:

1) The income for the purpose of the calculation of Part I.2 tax is based on the amount reported on each return.

2) The income for the purpose of the calculation of the age tax credit is based on the amount reported on that return.

Reasons FOR POSITION TAKEN:

1) The issue was previously considered in 2 memorandums (940566 and 942886) both dated January 25, 1995.

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2) The position is consistent with that previously taken for Part I.2 tax and the surtax under Part I.1.

									951933
XXXXXXXXXX							C.R. Bowen

Attention: XXXXXXXXXX

February 5, 1996

Dear Sirs:

We are writing in reply to your letter dated July 17, 1995, wherein you enquired whether it is the income reported on each or on all of the income tax returns of a deceased taxpayer filed for the year of death that should be taken into account in calculating 1) the age tax credit (the "age amount") for 1994 and subsequent taxation years under subsection 118(2) of the Income Tax Act (the "Act") and 2) the tax payable under section 180.2 of the Act on amounts received under the Old Age Security Act. We apologize for the delay in responding to your letter.

Our Comments

Pursuant to subsections 70(2) and 150(4) and paragraph 104(23)(d) of the Act, the legal representative of a deceased taxpayer may elect to exclude certain types of income from the "ordinary" income tax return filed for the deceased and instead report that income on a separate return "as if the taxpayer were another person". Prior to 1994, the age amount determined under subsection 118(2) of the Act was a fixed amount that could be claimed in full on the "ordinary" income tax return for the year of death and on each of the separate returns filed for the "other person". For 1994 and subsequent taxation years, the formula for calculating the age amount requires the determination of "the individual's income for the year". It is our opinion that those words refer to the income reported on the particular return for which the calculation is being made and not to a combination of the income reported on all income tax returns of a deceased taxpayer filed for the year of death. This position recognizes that the income reported on the separate return is income that might have been included in the income of a later year had the deceased lived; and had such been the case, the age amount would have been available to reduce income taxes payable.

The statement on page 7 of the 1991 Guide for Preparing T1 Returns for Deceased Persons that the income from "all returns filed in the year of death" for a deceased taxpayer must be used in the calculation of the tax payable under section 180.2 of the Act no longer represents our position. It is currently our opinion that when calculating that tax, the words "the individual's income under Part I for the year" refer to the income reported on the particular return for which the calculation is required to be made and not to a combination of the income reported on all income tax returns of a deceased taxpayer filed for the year of death. In other words, the "ordinary" income tax return and the separate returns are treated as being filed by separate taxpayers. This opinion also applies to the revised calculation of that tax announced in the 1995 Federal Budget (now contained in the Notice of Ways and Means Motion tabled in the House of Commons on December 12, 1995) which applies to the 1996 and subsequent taxation years.

As indicated in paragraph 21 of the Information Circular 70-6R2 dated September 28, 1990, this opinion is not a ruling and, accordingly, it is not binding on Revenue Canada.

Yours truly,

for Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch