2014-0527611E5 T1135 for Deceased Individual

Principal Issues: For the T1135, how to calculate the cost amount of shares held as capital property in the year of death of an individual.

Position: Cost amount at year-end will be nil.

Reasons: A taxpayer who is deceased cannot hold property.

Author: Cao, Jack
Section: 233.3; 70(5)

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                                                                                                                                                       2014-052761

August 21, 2014

Dear XXXXXXXXXX:

Re: T1135 for deceased individual

We are writing in response to your e-mail of March 26, 2014, concerning the reporting requirements for the form T1135 in the year of a taxpayer’s death. In particular, you asked how to determine the cost at year-end and maximum cost during the year using the regular and the transitional reporting methods.

In your email, you described a hypothetical situation where an individual died on July 1, 2013, owning property that was specified foreign property with a total cost amount of $500,000, consisting of shares of non-resident corporations (that are not foreign affiliates). You asked us if the cost amount at year-end should be reported as nil since the estate is deemed to have acquired the property from the taxpayer at the time of death. As well, you asked whether the maximum cost amount for the year should be determined based on the period from January 1, 2013, to July 1, 2013, even though the taxation year of the deceased is the 2013 calendar year.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, “Advance Income Tax Rulings”, dated May 17, 2002.  This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. However, we are prepared to provide the following comments.

We agree that the reporting period is the calendar year. However, since the taxpayer is deemed to have disposed of the property immediately before death, the relevant period for determining the maximum cost amount for the year will be from January 1 until the date of death.

With respect to the determination of the cost amount at year-end, the situation is similar to that of any taxpayer who has disposed of its specified foreign property during the year. Since the taxpayer disposed of the property on the date of death, the cost amount of the property held at year-end would be nil. 

If the property is being reported using the 2013 Transitional Reporting Method (as described in the instructions on the form), the “Maximum cost amount during the year” is reported as nil. The “Cost amount at year-end” as discussed above will also be nil.

We trust that these comments will be of assistance.

Yours truly,

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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