2014-0525241I7 60(l) - Financial Dependence Ward of the Crown

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.

Principal Issues: Whether a ward of the Crown could be considered to have been financially dependent on the child's father?

Position: No.

Reasons: As a ward of the Crown, the child was financially dependent on the Crown.

Author: Tsang, Peky

Section: 60(l); 146(1) "refund of premiums"; 146(1.1);

                                                                                                                                                P. Tsang         

September 26, 2014


Re: RRSP transfer to a Financially Dependent Infirm Child

This letter is in reply to your correspondences of March 24, 2014 and April 11, 2014 regarding whether XXXXXXXXXX (hereinafter “Individual A”) would be considered financially dependent on XXXXXXXXXX father at the time of his death for the purpose of transferring an amount from the deceased’s registered retirement savings plan (“RRSP”) as a refund of premiums, in accordance with paragraph 60(l) of the Income Tax Act (the “Act”). Individual A is the sole beneficiary of XXXXXXXXXX father’s RRSP.

Individual A is an adult and is mentally and physically infirm. Individual A resided with both of XXXXXXXXXX parents, but due to XXXXXXXXXX father’s health issues and XXXXXXXXXX mother passing away, XXXXXXXXXX became a permanent ward of Child and Family Services in XXXXXXXXXX. Thereafter, XXXXXXXXXX did not live with XXXXXXXXXX father while he was alive. XXXXXXXXXX has since reached the age of majority and XXXXXXXXXX care is being transferred to Income Employment and Assistance. Due to XXXXXXXXXX mental and physical infirmity, Individual A is unable to maintain regular employment. XXXXXXXXXX was and will continue to be supported (financially and otherwise) as a ward of the Crown. Also, Individual A’s assets will be managed by XXXXXXXXXX.

Even though Individual A did not live with XXXXXXXXXX father, they maintained a close relationship. There were supervised visits with XXXXXXXXXX father and Individual A participated in other family functions. While XXXXXXXXXX father was alive, he gave XXXXXXXXXX spending money, XXXXXXXXXX. If circumstances had permitted, Individual A would have been living with XXXXXXXXXX father.

Based on the foregoing, you ask whether Individual A would be considered financially dependent on XXXXXXXXXX father at the time of his death.

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in information circular (IC)70-6R6, “Advance Income Tax Rulings”.

As defined in subsection 146(1) of the Act, a "refund of premiums" generally includes an amount paid under an RRSP as a consequence of the death of the annuitant under the plan to a child or grandchild of the annuitant who was, immediately before death, financially dependent on the annuitant for support. A refund of premiums is included in the child or grandchild's income under subsection 146(8). Subject to certain conditions, where the refund of premiums is transferred to an infirm child’s or grandchild’s RRSP, there is a corresponding deduction under paragraph 60(l) of the Act.

It is a question of fact whether a child was financially dependent on a deceased annuitant immediately before the annuitant's death.  In general, subsection 146(1.1) of the Act assumes that an RRSP annuitant’s infirm child was not financially dependent on the annuitant prior to the annuitant’s death, if the infirm child’s income in the year before death exceeded the basic personal amount plus the disability amount for the year before death.  Some of the factors which may be considered in making this financial dependency determination include the income of the child from all sources, the cost of living and the ability of the child to provide for self-support, and any support received by the child from other persons. We are generally of the view that if a child is living with another individual who is providing support for the child at the time of the annuitant's death, the child would not be considered to be financially dependent upon the deceased for support at that time.

While Individual A’s father did make some financial contributions for XXXXXXXXXX care, it was the Crown who supported XXXXXXXXXX, which in our view makes XXXXXXXXXX financially dependent on the Crown. Consequently, in the current situation Individual A would not be considered to be financially dependent on the deceased at the time of death for the purpose of a deduction under paragraph 60(l) of the Act.  

We trust that our comments will be of assistance to you.

Yours truly,


Lita Krantz, CPA, CA
|for Director
Deferred Income Plans Section II
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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