I have filed a final return for deceased tax payers as the ordinary “Final” returns and the following year a lump some payment has arrived late with the following tax year.
I am looking at Rights and Things for filing in the new tax year as per the slip year but am not sure this is correct. When ready about rights and things it is based on earned income.
I am looking for advise on the correct method of preparation and whether some of the taxes can be reclaimed as they would have been under the Final Return from the previous year.
There is no trust involved and in this case there are three people inheriting form the estate.
From Return for rights or things:
Rights or things are amounts that had not been paid to the deceased at the time of their death and that, had the person not died, would have been included in their income when received. Rights or things can come from employment and other sources.
You can file a return for rights or things to report the value of the rights or things at the time of death. However, if you file a return for rights or things, you have to report all rights or things on that return, except those transferred to beneficiaries. You cannot split rights or things between the final return and the return for rights or things.
If you transfer rights or things to a beneficiary, you have to do so within the time limit for filing a return for rights or things. The beneficiary must report the income from the transferred rights or things on their return.
Employment rights or things
Employment rights or things are salary, commissions, and vacation pay, as long as both of these conditions are met:
- The employer owed them to the deceased on the date of death
- They are for a pay period that ended before the date of death
Other rights or things
Other rights or things include:
- old age security (OAS) benefits that were due and payable before the date of death
- uncashed matured bond coupons
- bond interest earned to a payment date before death, but not paid and not reported in previous years
- unpaid dividends declared before the date of death
- supplies on hand, inventory, and accounts receivable if the deceased was a farmer or fisher and used the cash method
- inventory of an artist who has elected to value their inventory at nil
- livestock that is not part of the basic herd and harvested farm crops, if the deceased was using the cash method
- work in progress, if the deceased was a sole proprietor and a professional (an accountant, a dentist, a lawyer [in Quebec an advocate or notary], a medical doctor, a veterinarian, or a chiropractor) who had elected to exclude work in progress when calculating their total income
For more information about rights or things, see interpretation bulletins IT212R3, Income of Deceased Persons - Rights or Things, and its Special Release, IT234 , Income of Deceased Persons - Farm Crops, and IT427R, Livestock of Farmers.
Some items that are not rights or things include:
- elected split-pension amounts
- amounts that accumulate periodically, such as interest from a bank account
- bond interest accumulated between the last interest payment date before the person died and the date of death
- registered retirement savings plan (RRSP) income
- amounts withdrawn from the AgriInvest Fund 2
- property included in capital cost allowance Class 14.1 (formerly eligible capital property) and capital property
- Canadian or foreign resource properties
- land in the deceased’s business inventory
- income from an income-averaging annuity contract
What was the lump sum payment for and how much? Rights or things are not just earned income. They include dividends declared and OAS payments received after death.
Sorry for delay in replying, busy tax season.
The payment was from an annuity
I am watching this closely as I am starting to prepare a final return for a client who is executrix for her mother who passed on Dec. 22/22. Will is probated.
A T4RIF was issued in early 2023, while capital of T4RIF was issued for 2022. Home was sold in May 2023 and funds went to estate. Would the 2023 T4RIF and proceeds from sale of home be done through Rights or Things or would a T3 be the way to go? And as JustJoe always says, there is more to a final return than what we see at first. The 2 beneficiaris are also planning on keeping the cottage left to them. Now for Capital Gains & GST, what suggestions for this.
Thank you,
Tom
Ignore GST in my previous post. It will be valuing the cottage and capital gains we will have to deal with
Note @helga_spence post above:
Some items that are not rights or things
- registered retirement savings plan (RRSP) income
A T4RIF indicates RRSP income.
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Thanks @Nezzer & @helga_spence
Once the dust settles I will put the proceeds of the principal residence and the T4RIF income in the T3 return
Tom
Fair market value of the home at date of death gets reported on final T1 return. Principal Residence exemption may be claimed on form T1255 to the extent applicable. House passes to the estate at its December 22nd value. Estate reports the actual sale of the house as capital property and uses the ACB as determined by the T1255.
Fair market value of cottage at date of death gets reported on final T1 return Schedule 3. There may be a cost base associated with the cottage and capital additions over the years to help mitigate the capital gain.
Fair market value of the RIF at date of death gets reported on final T1 return. The financial institution should have issued a T4RIF with an amount likely in box 18 as well as any payments made before death in box 16. Any increase in value between the date of death and the date the RIF was eventually collapsed would be shown on a separate T4RIF (likely box 22) and reported on the 2023 T3 return.
Nothing here is a “right or thing”.
@snowplowguy @Nezzer @helga_spence Your help has been huge. Now as the dust settles I am finding out a little more.
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Credential Asset provided a T4RIF in name of deceased with proceeds in Box 18 and paid out proceeds to the beneficiary her a T4RIF(2023) Box 22 for interest and beneficiary’s SIN.
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Home sold and lawyer sent proceeds directly to beneficiaries. Values being reported on S3 of Final T1. Values constant
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Recreational Property is basically vacant property. Still owned by Estate and beneficiaries settling on values and then lawyer can pass it to them as co-owners
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Cash in Estate account
Currently, I don’t feel there will be need for a T3, but I would sure appreciate any input from you or others.
Thank you so much.
Tom
You can’t record the sale of the principal residence on the terminal T1 because it occurred AFTER the date of death. This must be reported on a T3, and may also require a UHT-2900 (not sure - have to look up the details again).
Eventually the cottage will need to be sold or transferred to the beneficiaries, and that will need to be reported on a T3.
Any income earned on the RRSP account after the date of death must be reported on a T3.
I would get the trust number immediately, even if you don’t have anything to report for the first year. Just like any other entity, the trust is expected to file a tax return every year. So, even if you only report the sale of the cottage (say, in 2 or 3 years), you will need to file a T3 for each year, starting from the date of death.
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There is a deemed disposition if it didn’t rollover to a spouse. That deemed disposition should be reported on the terminal T1. Most likely it will be covered by the principal residence exemption.
Rein, that was already discussed - see above - the house was sold by the estate, to an arms-length party. The deemed disposition on death needs to be reported in addition to the actual sale months later.
If the time difference is not all that great wouldn’t it be convenient if that sale price and DOD value was the same. 
No requirement to file the UHT-2900 @Nezzer. A personal representative of a deceased individual or the estate of a deceased individual is considered to be an “Excluded Owner” under the UHT Act.
The fair market value of the recreational property needs to be reported on the Final T1.
It looks like the RIF had named beneficiaries because the beneficiary received a 2023 T4RIF for income after death, so the RIF likely did not pass to the estate.
Thanks, Wayne! Saved me looking it up.
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Thank you everyone for your assistance and input.
Filed T1 showing disposition of properties S3.
Spoke with a senior rep with CRA and filled out and had client sign and snail mail T3 with Schedule 1 for principal residence being sold. Attached copy of T1255 signed by executor.
Recreational property was rolled over to beneficiaries at proceeds of disposition value and capital gains were declared in T1 Final, so not reported on T3
Thanks again for your time and assitance.