All About Estates

Subsection 164(6) – Time Limit for Dispositions

The Canada Revenue Agency (CRA) was asked to consider allowing more time to allow for the application of a common post-mortem planning rule in those situations where delays in the probate process have caused a delay in the timing of the disposition of the properties of an estate.

The request concerns the application of subsection 164(6) of the Income Tax Act (the Act). In the course of administering the graduated rate estate of a taxpayer, subsection 164(6) of the Act allows a deceased taxpayer’s legal representative to elect to treat certain capital losses and terminal losses of the taxpayer’s graduated rate estate for its first taxation year, as losses of the taxpayer for the taxpayer’s last taxation year. The election, which results in the carry back of the elected amount to the final return of the deceased, can be useful in addressing potential double taxation which may arise, for example, where the deceased held corporate shares with accrued gains at death.

However, for this provision to apply, the legal representative must dispose of the capital property of the estate or all of the depreciable property of a prescribed class of the estate within the first taxation year of the estate. Subsection 164(6) of the Act does not provide the Minister of National Revenue with any discretion to extend this period.

As we all know, many deadlines were extended to accommodate delays in processes on account of the COVID-19 closures and slowdowns. That said, the CRA indicated in their response that the agency is unable to extend the time limit for the dispositions in subsection 164(6) of the Act beyond the first taxation year of the graduated rate estate.

Timing is key – please check with a professional as you navigate the post-mortem planning space.

About Derek de Gannes
Derek A. de Gannes: Senior Director, Private Client Services of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: derek.degannes@rsmcanada.com

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