I am preparing a return for a deceased person who was 94 years old. This person always had OAS income and interest income (T3, T5, T5008) and her bank managed all her investment and no other income.
I prepared her 2020 tax return and entered the date of death, which was January 16, 2021. Used all her T3, T5, and T5008 that was received for 2020.
My only concern, is that I received a “Client Tax Statement (Special)” from her bank which states all the assets (investments) she had at the date of the death and they had listed all her investment at market value, book value, and gain/loss.
My question is where do I report these amounts in the special statement. These amounts are for the year 2021 at the time of her death as considered sold at market value at the date of her death. Also, can this return be e-filed or is it better to be sent by mail to send a copy of the death certificate, a copy of POA, and the will?
this deceased person is not your client anymore. They are deceased.
if you wish this engagement, you would need a new engagement letter from the executor of the estate, who (probate might prove) is the new legal representative. (And would be your new client).
that engagement letter may well only be for the first tax return (2020 t1) that will need to be done. (Which essentially does not have death issues, except for points 1 and 2 above) (and yes, the executor will need to send the usual documents to cra, which cra now can receive by uploading). (The 2020 return is, of course, not a final return).
4) since you may not be very familiar with capital dispositions on death and ownership etc(2021 T1), the subsequent acquisition by the trust of these assets and subsequent trust reporting, (T3), (depending on the will etc) perhaps you may wish to consider referring the executor to an estate accountant.
When a persons dies they are deemed to have disposed of all their capital property at FMV. The deemed disposition should be reported as a normal capital gain. It is fine to efile the return. CRA appears to be extending the authorisation of existing to clients to the post mortem period so unless you need a new authorisation (for the testamentary trust for example) there is no need submit the will and DC. A POA ceases once a person has died as the executor is the legal representative.
You are lucky the bank sent you that special statement. I usually have to beat the information out of either the executor or the broker.
I think you may have missed that the deceased was NOT dead in 2020.
Therefore they did NOT dispose of anything in 2020 by deeming.
The tax preparer must take instructions from the new client, being the Executor.
That Executor also needs to get authorization from CRA, and similarly, can grant authorization to a tax accountant, if they wish.
Notwithstanding administrative convenience, there is no longer any (old) authority carried forward in a legal sense, so legal liability may attach. Best to work via a lawyer if in doubt.
Thanks, Jim. I am aware that assets deemed disposed of at the time of death. This statement is dated 2021, which lists the market value of her asset at that time (date of death). Do I use these amounts (Schedule 3) for 2021 taxation year?
The other slips (T3,T5, T5008) are for the year 2020 which used for 2020.
There is very large potential legal liability in deceased matters.
Have you received clear engagement scope terms in writing from the Executor, and have you established from the deceased’s lawyer that the Will you have granting the authority is valid?
Why don’t you just pend this whole matter until after April 30 and you have time? - You have several months to play with still. There is no need to rush to place yourself at legal risk.
Take your time to liaise with the Executor and the estate’s lawyer.
There are pots of liability lying all over the place in deceased estates.
Since the person died in 2021 the deemed disposition would be filed on the 2021 final personal return.
As discussion is on filing final return, how can I upload copy of Letter of Probate and will when I efile, or is there a particular area in SUBMIT DOCUMENTS in Rep a Client?
You submit the Will / Probate using Submit Documents.
I always use the following options:
This is the best option that I’ve found, as one of the main purposes of submitting the Will is to validate who the administrators to authorize them finalize the estate. Then I document in the description, in less than 100 characters, what I’m submitting.
Thank you gentlemen. Let’s see what happens.
May have to buy you a coffee after COVID