How to file taxes for a deceased person in canada

Imagine this, your father or mother, brother or sister passed a year ago. You’re left with the task of filing the income tax return for them and you do not know where to start. But before you panic and/or give up on it all together, I’m going to show you how to file taxes for a deceased person in canada step by step with what you need to know.

The death of a loved one is always devastating. The loss of a love one can be taxing both emotionally and financially. Taking care of the deceased person’s final affairs after his/her death, including last will and testament, and also Social Security benefits, savings bonds, insurance policies, etc., can take quite a lot of time and effort.

The tax filing process for a deceased person is similar to the process for filing taxes when you’re still alive. However, there are some additional steps you’ll need to take if your loved one has passed away.

Here’s what you need to know:

Determine whether you’re eligible for an extension on your taxes
File any returns that were due before the date of death (if applicable)
Complete Form T1A (Statement of Accrued Income Tax) and/or Form T3 ( Trust Income Tax and Information Return) as applicable

Are you the legal representative?

You are the legal representative of a deceased person if you are in one of the following situations:

You are named as the executor in the will
You are appointed as the administrator of the estate by a court
You are the liquidator for an estate in Quebec
You are requesting to be recognized as the person who will manage the CRA tax matters for the deceased person, where there is no will or other legal documents. For all provinces and territories, complete form RC552 Appointing a Representative for a Deceased Person. Send a completed RC552 to the Authorizations Services Unit (ASU) of the deceased’s tax centre.

See executor, administrator, and liquidator in Definitions.

Note

As the legal representative, you may wish to appoint an authorized representative to deal with the CRA for tax matters on your behalf.

For more information go to Representative authorization.

Unless included in your business income, any trustee, executor, or liquidator fees paid to you for acting as an executor are income from an office or employment. As the executor, you must report these fees on a T4 slip.

For more information, see Employment by a trustee in Chapter 1 of the T4001, Employers’ Guide – Payroll Deductions and Remittances.

What are your responsibilities as the legal representative?

As the legal representative, you should provide the CRA with the deceased’s date of death as soon as possible. You can advise the CRA by calling 1-800-959-8281, by sending a letter, or a completed Request for the Canada Revenue Agency to Update Records form. This form is included with the Information Sheet RC4111, Canada Revenue Agency – What to Do Following a Death. To get a copy of this publication, go to CRA forms and publications, or call 1-800-959-8281.

To keep the deceased’s records up to date, also send the CRA all of the following information:

a copy of the death certificate
a completed copy of the will or other legal document such as a grant of probate or letters of administration showing that you are the legal representative
the mailing address of the estate
if not already sent, a completed Request for the Canada Revenue Agency to Update Records form

The deceased individual’s social insurance number (SIN) must be provided on any request or any documents you are sending to the CRA.

If you did not send this information upon the deceased’s death, send it with their final tax return.

To obtain online access to the taxpayer’s tax information, you must register for Represent a Client prior to sending a copy of the legal documents. Once you have registered with the Represent a Client service, you will be assigned a representative identifier (RepID). Make sure to provide your RepID, in addition to the deceased’s SIN, when you are submitting all the required documents.

This guide deals only with your responsibilities under the Income Tax Act (the Act). Under the Act, as the legal representative, it is your responsibility to:

file all required returns for the deceased
ensure that all taxes owing are paid
let the beneficiaries know which of the amounts they receive from the estate are taxable

As the legal representative, you are responsible for filing a return for the deceased for the year of death. This return is called the final return. For more information, see Chapter 2.

You also have to file any returns for previous years that the deceased person did not file. If the person did not leave records about these returns, or if you cannot tell from existing records whether or not the returns were filed, contact the CRA at 1-800-959-8281.

If you have to file a return for a year before the year of death, use an Income Tax and Benefit Return for that year. Previous-year returns are available at CRA forms and publications or by calling 1-800-959-8281.

You have to file a T3 return, to report the income the estate earned after the date of death. If the terms of a trust were established by the will or a court order in relation to the deceased individual’s estate under provincial or territorial dependant relief or support law, you also have to file a T3 Trust Income Tax and Information Return for that trust. However, you may not have to file a T3 return (not to be confused with the final return, which always has to be filed) if the estate is distributed immediately after the person dies, or if the estate did not earn income before the distribution. In these cases, you should give each beneficiary a statement showing their share of the estate. See Guide T4013, T3 Trust Guide, for more information and, where a trust is created, to determine whether that return has to be filed. See Chart 2 to find out what income to report on the T3 return.

Deemed Year-End of a Trust on Death

On the dat of death of the following individuals, the particular trust will have a deemed year end:

The settlor of an alter ego trust
the spouse or common-law partner beneficiary of a spousal or common-law partner trust
the last surviving spouse or common-law partner beneficiary of a joint spousal or common-law partner trust
an individual (other than a trust) who transferred property on a tax-deferred basis to certain type of trusts

The income that is deemed to be recognized by the trust upon the death of the beneficiary is taxed in the trust.

However, in the case of a testamentary spousal or common-law partner trust, a joint election between the trust and the deceased beneficiary’s graduated rate estate can be filed to report this income on the beneficiary’s final return. Report this income on the T3 slip issued to the beneficiary. For the joint election to be valid, all of the following requirements must be met:

The beneficiary was a resident of Canada immediately before death.
The trust is a testamentary trust that is a post-1971 spousal or common-law partner trust and was created by the will of a taxpayer who died before 2017.
The trust and the beneficiary’s graduated rate estate (GRE) jointly elect in prescribed form.
A copy of the joint election is filed with both the final T1 return of the beneficiary and the T3 return for the deemed year-end of the trust.

As the legal representative of the deceased beneficiary, you need to attach to the final T1 return the joint election in the form of a letter which contains all of the following information:

a heading identifying the letter as a subsection 104(13.4) election
the T1 and T3 account numbers
The income amount that was allocated in the T3 slip and reported on the final T1 return filed for the deceased beneficiary
the signatures, names and addresses of both the trustee(s) and the executor(s) for the deceased beneficiary

Do you need information from the deceased person’s tax records?

You can contact the CRA for information from the deceased’s tax records. When you write for such information, include the words “The Estate of the Late” in front of the deceased person’s name. Include your address so the CRA can reply directly to you. Before the CRA can give you information from the deceased’s records, they need the following:

a copy of the death certificate
the deceased’s social insurance number
a complete copy of the will or other legal document such as a grant of probate, trust agreement, or letters of administration showing that you are the legal representative

Goods and services tax/harmonized sales tax (GST/HST) credit received after the date of death

Generally, GST/HST credit payments are issued on the fifth day of the month in July, October, January, and April. If the fifth day falls on a weekend or a federal statutory holiday, the payment will be made on the last business day before that day. If the deceased was receiving GST/HST credit payments, the CRA may still send out a payment after the date of death because they are not aware of the death. If this happens, you should return the payment to the tax centre that serves your area.

Note

The CRA administers provincial and territorial programs that are related to the GST/HST credit. If the deceased was receiving payments under one of these programs, you do not have to take any further action. We will use the information provided for the GST/HST credit payments to adjust the applicable provincial or territorial credit program payments.

What if the deceased was single, separated, divorced, or widowed and received the GST/HST credit?

If the recipient died before the scheduled month in which the CRA issues the GST/HST credit, payments will no longer be issued in that person’s name or to that person’s estate.

If the recipient died during or after the scheduled month in which the CRA issues the credit and the payment has not been cashed, return it to the CRA so that they can send the payment to the person’s estate.

If the deceased was getting a credit for a child, the child’s new caregiver should contact the CRA at 1-800-387-1193, as they may qualify to receive GST/HST credit payments for that child.

What if the deceased’s GST/HST credit is for the deceased and their spouse or common-law partner?

The deceased’s spouse or common-law partner may now be eligible to receive the GST/HST credit if they filed an income tax and benefit return. The GST/HST credit payments will be based on their net income alone.

What if the surviving spouse’s or common-law partner’s GST/HST credit included a claim for the deceased?

The payments will be recalculated based on the surviving spouse’s or common-law partner’s net income and will only include a claim for them and any eligible children, if applicable.

What if the deceased is an eligible child?

Entitlement to GST/HST credit payments for a deceased child stops the quarter after the child’s date of death. You should notify the CRA of the date of death so that the CRA can update their records.

Canada child benefit (CCB) payments received after the date of death

Contact the CRA at 1-800-387-1193 and provide the date of death as soon as possible. If the deceased person was receiving CCB payments (which could include payments from related provincial or territorial child benefit and credit programs) for a child and the surviving spouse or common-law partner is the child’s parent, the CRA will usually transfer the CCB payments to that person.

If you received benefit payments for a child and your spouse or common-law partner has died, contact us with their date of death. We will recalculate your payments to adjust your revised family net income.

If anyone else, other than the parent, is now primarily responsible for the care and upbringing of the child, that person will have to apply for benefit payments for the child through one of the following options:

by using the “Apply for child benefits” online service on My Account
by completing and sending to the CRA, Form RC66, Canada Child Benefits Application, or by calling 1-800-387-1193

If the deceased is an eligible child, entitlement to CCB payments for the deceased child stops the month after the child’s date of death. You should notify the CRA of the date of death so that they can update their records.

Clearance certificate

As the legal representative, you may want to get a clearance certificate before you distribute any property under your control. A clearance certificate certifies that all amounts for which the deceased is liable to the CRA have been paid, or that the CRA has accepted security for the payment. If you do not get a clearance certificate and distribute the assets of the estate, you may be personally liable for the amount of tax owed by the deceased, to the extent of the value of the assets distributed. A clearance certificate covers all tax years to the date of death. It is not a clearance for any amounts a trust owes. If there is a trust, a separate clearance certificate is needed for the trust.

To request a certificate, complete Form TX19, Asking for a Clearance Certificate, and send it to your regional tax services office. Do not include Form TX19 with a return. Send it only after you have received the notices of assessment for all the returns filed, and paid or secured all amounts owing. You can find the address of your regional tax services office on Form TX19.

For more information about clearance certificates, call 1-800-959-8281. You can also see Information Circular IC82-6, Clearance Certificate.

Getting started

This section lists the steps you may need to follow to prepare the return.

1. Determine the deceased person’s income from all sources. You can do this by:

checking previous-year returns to get the names of employers and investment companies the deceased may have received income from in the past
checking safety deposit boxes for additional sources of income and benefits
contacting payers such as employers, banks, trust companies, stock brokers, and pension plan managers
getting information slips from payers (for example, a T4, Statement of Remuneration Paid, from an employer, or a T5, Statement of Investment Income, from a bank or trust company)
contacting Service Canada Centre at 1-800-622-6232, if the deceased was receiving Canada Pension Plan benefits or was 65 years or older and in receipt of old age security pension, and you do not have a T4A(P) slip or T4A(OAS) slip

Even if you cannot get the slips, you still have to report the income from all sources on either the final or the optional returns. Optional returns are explained in Chapter 3. You can also claim any related deductions as outlined in Chart 1. If a slip is not available, ask the payer to give you a note that shows the income and deductions. Attach this note to the return. If you cannot get a note from the payer, estimate the income and deduction amounts. For example, you can use pay stubs to estimate employment income and the amounts deducted for Canada Pension Plan or Quebec Pension Plan contributions, registered pension plan contributions, employment insurance premiums, union dues, and income tax. Attach a note to the return giving the amounts and the payer’s name and address. If possible, also attach a photocopy of the pay stubs.

2. Get the tax package for the province or territory where the deceased lived at the time of death. You will need to file an Income Tax and Benefit Return to report any taxable income and to claim any applicable deductions or credits.

3. Get any other guides, information circulars, interpretation bulletins, and forms that you may need. See References for a list of forms and publications referred to in this guide.

4. Complete and file a final return and any optional returns. For information on how to prepare a final return, see Chapter 2. For information on optional returns, see Chapter 3.

5. You may have to file a T3 Trust Income Tax and Information Return, in addition to a final return. For example, some of the amounts an employer pays may be income for the estate. Estate amounts can appear on T4A slips, T4RSP slips, or in a letter from the issuing institution. See Chart 2.

6. When you have received the notice of assessment for all required returns, you can apply for a clearance certificate. See Clearance certificate.

Common questions and answers

Here are some common questions and answers you may want to look at before you read this guide.

Q. Can I deduct funeral expenses, probate fees, or fees to administer the estate?

A. No. These are personal expenses and cannot be deducted.

Q. Who reports a death benefit that an employer pays?

A. That depends on who received the death benefit. A death benefit is income of either the estate or the beneficiary who receives it. Up to $10,000 of the total of all death benefits paid (other than CPP or QPP death benefits) is not taxable. If the beneficiary received the death benefit, see line 13000 in the Federal Income Tax and Benefit Guide. If the estate received the death benefit, see the T4013, T3 Trust Guide.

Q. On what return do I report Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) death benefits for the estate of the deceased?

A. The amount of the CPP or QPP death benefit is shown in box 18 of Form T4A(P), Statement of Canada Pension Plan Benefits. Do not report this amount on the final return for the deceased person.

If the CPP or QPP death benefit is payable to a beneficiary in the year it is received by the estate, a T3 slip will be issued in the beneficiary’s name and the beneficiary will be required to include the amount on their T1 return. The estate does not have the option to elect to have the benefit taxed in the estate if the estate otherwise has taxable income.

If the CPP or QPP death benefit is not paid or made payable to a beneficiary in the year it is received by the estate, the amount will be included in the estate’s taxable income reported on its T3 Trust Income Tax and Information Return in the year it is received by the estate and the estate will pay tax on that amount.

Where the CPP or QPP death benefit is the only income of the estate and a T3 return is not otherwise required to be filed, the death benefit can be reported directly on the T1 return of the beneficiary.

Unlike a death benefit that an employer may pay to the estate or to a named beneficiary, the CPP or QPP benefit is not eligible for the $10,000 death benefit exemption. You have to report all other CPP or QPP benefits on the deceased’s final return. For more information, see line 11400.

Q. Who reports amounts an employer pays for vacation and unused sick leave?

A. Vacation pay is income of the deceased person and can be reported on a return for rights or things. Payment for unused sick leave is considered a death benefit and is income of the estate or beneficiary who receives it. For more information, see Archived Interpretation Bulletin IT508R, Death Benefits.

Q. The deceased had investments in a tax-free savings account (TFSA). Who reports any income earned in the TFSA?

A. When the holder of a deposit or an annuity contract under a TFSA dies, the holder is considered to have received, immediately before death, an amount equal to the fair market value (FMV) of all the property held in the TFSA at the time of death. As a result, no income should be reported by the deceased on the final return or any optional returns. After the holder’s death, the annuity contract is no longer considered a TFSA and all earnings after the holder’s death are taxable to the beneficiaries in the year they receive this income. For more information, see Guide RC4466, Tax-Free Savings Account (TFSA), Guide for Individuals.

Q. If the deceased person was paying tax by instalments, do I have to continue making those instalment payments?

A. No. The only instalments the CRA requires are those that were due before the date of death but not paid.

Q. Why do I have to return the deceased person’s GST/HST credit?

A. Since the payments are an advance on purchases for the current calendar year, you have to return GST/HST credit payments that were paid to the deceased after their death. If the deceased was single and the estate is entitled to the payment, another payment will be issued to the estate. However, the payment that was issued to the deceased person must be returned to the CRA before the CRA reissues the payment to the estate.

Chapter 2 – Final return

This chapter explains how to complete and file the final return. The final return can be filed electronically or on paper. For more information on these filing methods, see “How to file your return” in the Federal Income Tax and Benefit Guide.

On the final return, report all of the deceased’s income from January 1 of the year of death, up to and including the date of death. Report income earned after the date of death on a T3 Trust Income Tax and Information Return. To find out what income to report on the T3 return, see Chart 2. For more information, see the T4013, T3 Trust Guide.

Tax Tip

In addition to the final return, you may be able to file up to three optional returns for the year of death.

Information about the deceased’s income sources will help you determine if you can file any of these optional returns. You do not report the same income on both the final and an optional return but you can claim certain credits and deductions on more than one return.

Although you do not have to file any of the optional returns, there may be a tax advantage if you file one or more of them in addition to the final return. You may be able to reduce or eliminate tax that you would otherwise have to pay for the deceased.

For more information, see Chapter 3 – Optional returns, and Chart 1.

What date is the final return due?

This section discusses when a return is due. For information about when a balance owing is due, see What is the due date for a balance owing?.

Generally, both the final return of the deceased and the return of their surviving spouse or common-law partner who was living with them are due on or before the following dates, if neither person was carrying on a business in 2021:

Period when death occurred	Due date for the final return
January 1 to October 31 of the year	April 30 of the following year
November 1 to December 31 of the year	6 months after the date of death

If the deceased or the deceased’s spouse or common‑law partner was carrying on a business in 2021 (unless the expenditures made in the course of carrying on the business were mainly the cost or capital cost of tax shelter investments), the following due dates apply to both individuals:

Period when death occurred	Due date for the final return
January 1 to December 15 of the year	June 15 of the following year
December 16 to December 31 of the year	6 months after the date of death

Tax Tip

Previous-year return – If a person dies early in 2022, on or before the filing due date for their 2021 return, and they have not filed that return, the due date for filing it and paying any balance owing is 6 months after the date of death. In that case, the due date for filing the 2021 T1 return of a surviving spouse or common-law partner who was living with the deceased is the same as the due date for the deceased’s 2021 return. However, any balance owing on the surviving spouse’s or common-law partner’s 2021 return must still be paid on or before April 30, 2022, to avoid interest charges.

In that situation, the legal representative may choose to file the final return in 2022. The return generally will be processed in that year, using tax legislation applicable to the 2021 tax year. The legal representative then can request a reassessment of the return in the following year (2023) to apply any tax changes introduced for the 2022 tax year.

Note

For other previous-year returns that are already due but were not filed by the deceased, the due dates for filing those returns, as well as payment of any related taxes owing, remain the same.

When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, the return is considered on time if the CRA receives it or if it is postmarked on or before the next business day.

The deceased’s will or a court order may set up a testamentary spousal or common-law partner trust. When testamentary debts of the deceased or the estate are being handled through the trust, the due date for the final return is extended to 18 months after the date of death. However, you have to pay any taxes owing on the final return by the due date shown in What is the due date for a balance owing?.

What happens if you file the final return late?

If you file the final return late and there is a balance owing, the CRA will charge a late-filing penalty. The penalty is 5% of any balance owing, plus 1% of the balance owing for each full month that the return is late, to a maximum of 12 months. The late-filing penalty may be higher if the CRA charged a late-filing penalty on a return for any of the three previous years. The CRA will also charge you interest on both the balance owing and any penalty.

Tax Tip

Even if you cannot pay the full amount owing by the due date, you can avoid this penalty by filing the return on time.

In certain situations, the CRA may cancel this penalty and interest if you file the return late because of circumstances beyond your control. If this happens, complete Form RC4288, Request for Taxpayer Relief: Cancel or Waive Penalties or Interest, or include a letter with the return explaining why you filed the return late. For more information, go to Taxpayer Relief Provisions or see Information Circular IC07-1R1, Taxpayer Relief Provisions.

What is the due date for a balance owing?

The due date for a balance owing on a final return depends on the date of death.

Period when death occurred	Due date for the amount owing
January 1 to October 31 of the year	April 30 of the following year
November 1 to December 31 of the year	6 months after the date of death

Note

No matter when the person died, any balance owing on the surviving spouse’s or common‑law partner’s 2021 return still has to be paid on or before April 30, 2022, to avoid interest charges.

If you do not pay the amount in full, the CRA will charge compound daily interest on the unpaid amount from the day after the due date of the return to the date you pay the amount owing.

In some cases, you can make an election to delay paying part of the amount due. For instance, you can delay paying part of the amount owing from rights or things and the deemed disposition of capital property.

How to complete the final return

The following steps explain the most common lines on a deceased person’s return. For more information on these and other lines on a return, see the Federal Income Tax and Benefit Guide.

Step 1 – Identification and other information

In this area of the return:

Enter the deceased information in all the boxes.
Write “The Estate of the Late” before the name of the deceased.
Give your address as the mailing address.
Ensure the province or territory of residence on December 31 is the one where the deceased was living on the date of death.
Tick the box that applies to the deceased’s marital status at the time of death.
Enter the date of death on the proper line.

Step 2 – Total income

Report amounts that are paid regularly, even if the person did not receive them before they died. Some examples of these amounts are salary, interest, rent, royalties, and most annuities. These amounts usually accumulate in equal daily amounts for the time they are payable. For more information, see Archived Interpretation Bulletin IT210, Income of Deceased Persons – Periodic Payments and Investment Tax Credit.

There are two types of amounts that do not accumulate in equal daily amounts:

certain amounts receivable by the deceased, but not payable to the deceased on or before the date of death
amounts from some annuity contracts that the CRA considers to have been disposed of on death

For more information about amounts receivable on or before the date of death, see 1. Return for rights or things.

Foreign income

If the deceased earned foreign income at any time in 2021, see “Reporting foreign income and other foreign amounts” in the Federal Income Tax and Benefit Guide.

Amounts an employer pays to the deceased person’s estate

There may be amounts that an employer will pay to a deceased employee’s estate. For these amounts, an employer will usually complete a T4 or T4A slip.

Some of the amounts an employer pays will be part of the deceased’s employment income for the year of death. Report these amounts on the final return. The amounts are employment income for the year of death even if they are received in a year after the year of death. Box 14 of the T4 slip should include the following amounts:

salary or wages (including overtime) from the end of the last pay period to the date of death
salary or wages (including overtime) for a pay period finished before the date of death, but paid after death
payment for vacation leave earned but not taken

The employer may change any of these amounts later because of an agreement or promotion. If the document that allows the change was signed before the date of death, report these additional amounts on the final return. However, if the document was signed after the date of death, the additional amounts are not taxable. (see Chart 3).

Some of these amounts may be rights or things, and you may be able to report them on an optional return. For more information, see 1. Return for rights or things. Some of the amounts an employer pays are income for the estate and should be reported on a T3 Trust Income Tax and Information Return. See Chart 2.

Lines 10100 to 10400 – Employment income

Enter all salary, wages, or commissions received from January 1 to the date of death. Also include amounts that accumulate from the start of the pay period in which the employee died to the date of death.

To determine how to report the commission income and claim expenses for a self-employed salesperson, see Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Line 11300 – Old age security pension

Enter the amounts from box 18 of the deceased’s T4A(OAS) slip. A payment received after the date of death for the month in which the individual died may be reported on the final return or on a rights or things return.

Do not enter on line 11300 the amount in box 21 of the T4A(OAS) slip. Enter this amount on Line 14600, – Net federal supplements. You may be able to claim a deduction for this amount on Line 25000, – Other payments deduction.

Note

If the deceased’s net income before adjustments (line 23400), minus the amounts entered on lines 11700 and 12500, plus the amount deducted on line 21300 and/or any repayment of registered disability savings plans income on line 23200, is more than $79,845, all or part of the old age security benefits may have to be repaid. To calculate the deceased’s OAS repayment, complete the chart on the back of the T4E slip of the deceased.

Line 11400 – CPP or QPP benefits

Enter the total Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits in box 20 of the deceased’s T4A(P) slip, minus any amount in box 18. The amount in box 20 is the total of the amounts in boxes 14 to 18. A payment received after the date of death for the month in which the individual died may be reported on the final return or on a rights or things return.

If the deceased received a lump-sum CPP or QPP benefit, or a CPP or QPP disability benefit, see line 11400 in the Federal Income Tax and Benefit Guide.

Do not include a CPP or QPP death benefit shown in box 18 on the final return. This amount will be included in the income of the estate and reported on a T3 Trust Income Tax and Information Return for the year in which the amount was received by the estate. However, if the CPP death benefit is payable to a beneficiary of the estate in the year that it was received by the estate, the estate is entitled to deduct the amount from its income. In this case a T3 slip will be issued in the beneficiary’s name and the beneficiary will be required to include the amount on line 13000 of their T1 return. The estate does not have the option to elect to have the benefit taxed in the estate if the estate otherwise has taxable income.

Where the CPP or QPP death benefit is the only income of the estate and a T3 return is not otherwise required to be filed, the death benefit can be entered directly on line 13000 of the T1 return of the beneficiary.

A CPP or QPP death benefit will generally not be taxable where the recipient deals at arm’s length with the estate (is not the beneficiary of the estate) and all of the following apply:

the amount is received by a taxpayer who paid the deceased’s funeral expenses
the amount does not exceed the actual funeral expenses
the deceased has no heirs and there is no other property in the estate

Line 11500 – Other pensions or superannuation

Enter any other pensions or superannuation the deceased received from January 1 to the date of death, such as amounts shown in box 016 on T4A slips and box 31 on T3 slips. If there is a lump-sum amount shown in box 018 of the T4A slip or box 22 of the T3 slip, enter it on line 13000.

If the deceased received annuity or registered retirement income fund (RRIF) payments, including life income fund (LIF) payments, for the period from January 1 to the date of death, report that income on the final return.

If the deceased was 65 or older, enter the RRIF income on line 11500. Regardless of age, enter the RRIF income on line 11500 if the deceased received the RRIF payments because their spouse or common-law partner died. In all other cases, enter the RRIF income on line 13000 of the return. For more information, see Income from a registered retirement income fund (RRIF).

If the deceased person jointly elected with their spouse or common-law partner to split the pension, annuity, and RRIF (including LIF) payments that were entered on line 11500 by the pensioner, the elected split-pension amount transferred from the pensioner to the pension transferee can be deducted on line 21000. For more information, see Line 21000 – Deduction for elected split-pension amount.

Line 11600 – Elected split-pension amount

To make this election, the deceased and their spouse or common-law partner must have jointly elected to split pension income by completing Form T1032, Joint Election to Split Pension Income. The elected split-pension amount from line G of Form T1032 must be entered on line 11600 of the receiving spouse or common-law partner’s return.

Form T1032 must be filed by the filing due date for the 2021 return (see What date is the final return due?). This form must be attached to the paper return of both the deceased and their spouse or common-law partner. The information provided on both forms must be the same.

Both the deceased person and their spouse or common-law partner must have signed Form T1032. If the form is being completed after the date of death, the surviving spouse or common-law partner and the legal representative of the deceased person’s estate must sign the form. In some cases, the legal representative may be the spouse or common-law partner, in which case this person must sign for the deceased person too.

Line 11900 – Employment insurance benefits

Enter any employment insurance (EI) benefits the deceased received from January 1 to the date of death (box 14 of the T4E slip).

If the deceased’s net income before adjustments (line 23400), minus the amounts entered on lines 11700 and 12500, plus the amount deducted on line 21300 and/or any repayment of registered disability savings plans income (line 23200), is more than $70,375, part of these benefits may have to be repaid.

If the deceased repaid any EI benefits to Service Canada, they may be entitled to a deduction. For more information, see line 23200 in the Federal Income Tax and Benefit Guide.

Line 11905 – Employment insurance maternity and parental benefits and provincial parental insurance plan benefits

Report on this line the total of the following amounts:

employment insurance maternity and parental benefits from box 37 of the T4E slip for the deceased
provincial parental insurance plan benefits from box 36 of the T4E slip for the deceased

These amounts are already included on line 11900 of the return for the deceased, so do not add them again when you calculate the total income on line 15000 of the deceased’s return.

Lines 12000 and 12100 – Investment income

Enter all investment income the deceased received from January 1 to the date of death. This type of income includes dividends (line 12000) and interest (line 12100).

Also include the following:

amounts earned from January 1 to the date of death that have not been paid
amounts earned from term deposits, guaranteed investment certificates (GICs), and other similar investments from the last time these amounts were paid to the date of death
bond interest earned from the last time it was paid to the date of death, if the deceased did not report it in a previous year
compound bond interest that accumulated to the date of death, if the deceased did not report it in a previous year

You can report some types of investment income as rights or things. For details, see 1. Return for rights or things. Report interest that accumulates after the date of death on a T3 Trust Income Tax and Information Return.

Line 12500 – Registered disability savings plan (RDSP) income

If the beneficiary of an RDSP dies, the RDSP must be closed no later than December 31 of the year following the year of the beneficiary’s death. Any funds remaining in the RDSP, after any required repayment of government bonds and grants, will be paid to the estate. If a disability assistance payment (DAP) had been made and the beneficiary is deceased, the taxable portion of the DAP must be included in the income of the beneficiary’s estate in the year the payment is made.

Line 12700 – Taxable capital gains

For information about this type of income, see Chapter 4.

Line 12900 – RRSP income

At the time of death, a person may have a registered retirement savings plan (RRSP). The RRSP may or may not have matured. Depending on the situation, the amount you include in the deceased’s income can vary.

If the deceased person jointly elected with their spouse or common-law partner to split RRSP annuity payments that the pensioner received up until the date of death and entered on line 12900, the elected split-pension amount can be deducted on line 21000. For more information, see Line 21000 – Deduction for elected split-pension amount.

Payments from a matured RRSP – A matured RRSP is one that is paying retirement income, usually in monthly payments. Enter on line 12900 the RRSP payments the deceased received from January 1 to the date of death.

If the annuitant’s spouse or common-law partner is designated as a beneficiary of the RRSP, in the RRSP contract or the will, they will begin receiving the remaining annuity payments from the plan. The surviving spouse or common-law partner has to enter the remaining payments as income on their return.

If the surviving spouse or common-law partner is the beneficiary of the estate, that person and the legal representative can jointly elect, in writing, to treat the amounts the RRSP paid to the estate as being paid to the spouse or common-law partner. Attach a copy of the written election to the return of the surviving spouse or common-law partner. The election has to specify that this person is electing to become the annuitant of the RRSP.

If the amounts from the RRSP are paid to a beneficiary other than the deceased’s spouse or common-law partner, enter the amount from box 34 of the T4RSP slip on line 12900 of the deceased’s return. For more information, see Information Sheet RC4177, Death of an RRSP annuitant, and Guide T4040, RRSPs and Other Registered Plans for Retirement.

Payments from an unmatured RRSP – Generally, an unmatured RRSP is one that does not yet pay retirement income.

Generally, the CRA considers a deceased annuitant to have received, immediately before death, an amount equal to the fair market value (FMV) of all the property of the unmatured plan at the time of death. The FMV of the property is shown in box 34 of the T4RSP slip issued to the deceased annuitant. You have to include this amount in the deceased’s income for the year of death.

If a T4RSP slip showing the FMV of the plan at the time of death is issued in the deceased’s name, you may be able to reduce the amount you include in the deceased’s income. For details, see Information Sheet RC4177, Death of an RRSP Annuitant, and Guide T4040, RRSPs and Other Registered Plans for Retirement.

If all of the property held in the RRSP is to be paid to the surviving spouse or common-law partner, and that payment is directly transferred to their RRSP, RRIF, pooled registered pension plan (PRPP), specified pension plan (SPP), or to an issuer to buy the surviving spouse or common-law partner an eligible annuity (as specified in the RRSP contract or the will) before the end of the year following the year of death, a T4RSP slip will not be issued in the deceased’s name. In this case, the surviving spouse or common-law partner has to report the payment on their return and claim a deduction equal to the amount transferred.

Sometimes there is an increase in the value of an RRSP between the date of death and the date of final distribution to the beneficiary or estate. This amount has to be included in the income of the beneficiary or the estate for the year it is received. A T4RSP slip will be issued for this amount. For more information, see Chart 6 – Amounts from a deceased annuitant’s RRSP, in Chapter 5 of Guide T4040, RRSPs and Other Registered Plans for Retirement.

Sometimes, the FMV of the property of an unmatured RRSP decreases between the date of death and the date of final distribution to the beneficiary or the estate. If the total of all distributions from the RRSP is less than the FMV of the property that was included in the deceased annuitant’s income for the year of death, the deceased’s legal representative can request that the difference be deducted on the deceased’s final return. Generally, for the deduction to be allowed, the final distribution must occur by the end of the year that follows the year of death. For more information, see Information Sheet RC4177, Death of an RRSP Annuitant.

If the amounts from the RRSP are paid to a beneficiary other than the deceased’s spouse or common-law partner, see Guide T4040, RRSPs and Other Registered Plans for Retirement.

Rollover of RRSP proceeds to a registered disability savings plan (RDSP) – The existing RRSP rollover rules discussed in the previous section are extended to allow a specified RDSP payment from the deceased person’s RRSP to the RDSP of an eligible individual.

An eligible individual is a child or grandchild of a deceased annuitant under an RRSP or a RRIF, or of a deceased member of a registered pension plan (RPP), PRPP, or SPP who was financially dependent on the deceased for support at the time of the deceased’s death, because of an impairment in physical or mental function.

A specified RDSP payment is a payment that meets all of the following conditions:

the payment is made to an RDSP under which the eligible individual is the beneficiary
the payment satisfies the contribution conditions described in Guide RC4460, Registered Disability Savings Plan
effective March 19, 2019, if the eligible individual no longer qualifies for the disability tax credit, the payment is made before the end of the fifth taxation year throughout which the beneficiary is ineligible for the disability tax credit

Home Buyers’ Plan (HBP) – The deceased may have participated in the HBP. If so, the deceased would have made a withdrawal from their RRSP and may have been making repayments to their RRSP, PRPP, or SPP. In this case, include on line 12900 the total of all amounts that remain to be repaid at the time of death. The amount of any RRSP, PRPP, SPP, or contributions that the deceased made to their individual plans in the year of their death can be designated as a repayment.

However, you do not have to report these amounts when the legal representative and the surviving spouse or common-law partner jointly elect to have the surviving spouse or common-law partner continue to make the repayments.

Lifelong Learning Plan (LLP) – The deceased may have participated in the LLP. If so, the deceased would have made a withdrawal from their RRSP and may have been making repayments to their RRSP, PRPP, or SPP. Treatment of these amounts is the same as with the Home Buyer’s Plan, and a similar election is available. For more information, see Guide RC4112, Lifelong Learning Plan (LLP).

Line 13000 – Other income

Use this line to report taxable income not reported anywhere else on the return. Identify the type of income you are reporting in the space to the left of line 13000. Some of the types of income you report on this line are discussed in the following sections. For more information, see line 13000 in the Federal Income Tax and Benefit Guide.

Death benefits (other than Canada or Quebec Pension Plan death benefits) – A death benefit is an amount received after a person’s death for that person’s employment service. It is shown in box 106 of the T4A slip or box 26 of the T3 slip. A death benefit payable in respect of the deceased person is not reported on the final return for the deceased; rather, it is income of the estate or the beneficiary that receives it. Up to $10,000 of the total of all death benefits paid may not be taxable. For more information, see line 13000 in the Federal Income Tax and Benefit Guide or Archived Interpretation Bulletin IT508R-Death Benefits.

Income from a registered retirement income fund (RRIF) – When a person dies, they may have a RRIF. Depending on the situation, the amount you include in the deceased’s income can vary.

If the deceased received payments from a RRIF for the period from January 1 to the date of death, report that income on the final return. If the deceased was 65 or older, or if the deceased was under 65 and received the RRIF payments due to the death of their spouse or common-law partner, see Line 11500 – Other pensions or superannuation. In all other cases, enter the RRIF income on line 13000.

If the annuitant made a written election in the RRIF contract or in the will to have the RRIF payments continue to be paid to their spouse or common-law partner after death, that person becomes the annuitant and will start to get the RRIF payments as the new annuitant.

If the annuitant did not elect in writing to have the RRIF payments continue to be paid to their spouse or common-law partner, that person can still become the annuitant of the RRIF after the annuitant’s death. This is the case if the legal representative consents to the deceased’s spouse or common-law partner becoming the annuitant, and the RRIF carrier agrees to continue the payments under the deceased annuitant’s RRIF to the surviving spouse or common-law partner.

A T4RIF slip will not be issued in the deceased annuitant’s name for the fair market value (FMV) of the property at the time of death if all of the following conditions are met:

All of the property held by the RRIF is to be paid to the surviving spouse or common-law partner (as specified in the RRIF contract or the will).
The entire eligible amount of the designated benefit is directly transferred to the surviving spouse’s or common-law partner’s RRIF, RRSP, PRPP, SPP, RDSP, or to an issuer to buy an eligible annuity for the surviving spouse or common-law partner.
All the RRIF property is distributed before the end of the year following the year of death.

In this case, the surviving spouse or common-law partner will receive a T4RIF slip, has to report the payment on their return, and is eligible to claim a deduction equal to the amount directly transferred.

For all other situations, the CRA considers that the deceased received, immediately before death, an amount equal to the FMV of the plan at the time of death. The FMV of the property is shown in box 18 of the T4RIF slip issued in the deceased’s name. Include this amount in the deceased’s income for the year of death. However, you may be able to reduce the amount you include in income. For more information, see Information Sheet RC4178, Death of a RRIF Annuitant or a PRPP Member, and Guide T4040, RRSPs and Other Registered Plans for Retirement.

Sometimes there is an increase in the value of a RRIF between the date of death and the date of final distribution to the beneficiary or estate. Generally, this amount has to be included in the income of the beneficiary or the estate for the year it is received. A T4RIF slip will be issued for this amount. For more information, see Chart 7 – Amounts from a deceased annuitant’s RRIF, in Chapter 5 of Guide T4040, RRSPs and Other Registered Plans for Retirement.

Sometimes, the FMV of the property of a RRIF decreases between the date of death and the date of final distribution to the beneficiary or the estate. If the total of all distributions from the RRIF is less than the FMV of the property that was included in the deceased annuitant’s income for the year of death, the deceased’s legal representative can request that the difference be deducted on the deceased’s final return. Generally, for the deduction to be allowed, the final distribution must occur by the end of the year that follows the year of death. For more information, see Information Sheet RC4178, Death of a RRIF Annuitant or a PRPP Member.

Rollover of RRIF proceeds to a registered disability savings plan (RDSP) – The existing RRIF rollover rules discussed in the previous section allow a specified RDSP payment from the deceased person’s RRIF to the RDSP of an eligible individual.

An eligible individual is a child or grandchild of a deceased annuitant under an RRSP or a RRIF, or of a deceased member of an RPP, an SPP, or a PRPP, who was financially dependent on the deceased for support at the time of the deceased’s death, because of an impairment in physical or mental function.

Rollovers from other plans – The existing RRIF rollover rules discussed in the previous section allow a specified RDSP payment from the deceased person’s RPPs, PRPPs, and SPPs to the RDSP of an eligible individual.

A specified RDSP payment is a payment that meets all of the following conditions:

the payment is made to an RDSP under which the eligible individual is the beneficiary
the payment satisfies contribution conditions described in Guide RC4460, Registered Disability Savings Plan
effective March 19, 2019, if the eligible individual no longer qualifies for the disability tax credit, the payment is made before the end of the fifth taxation year throughout which the beneficiary is ineligible for the disability tax credit

For more information on this topic, go to Registered disability savings plan (RDSP) or see Information Sheet RC4178, Death of a RRIF Annuitant or a PRPP Member.

Lines 13499 to 14300 – Self-employment income

If the deceased had self-employment income, enter the gross and net income or loss on the appropriate line. For more information, see lines 13499 to 14300 in the Federal Income Tax and Benefit Guide.

Reserves in the year of death – Sometimes, when a property is sold, some of the proceeds are not payable until after the year of sale. Similarly, a self-employed person may have amounts that they will receive in a later year for work done this year. An example is for work in progress.

Usually, a person can deduct from income the part of the proceeds that are not payable until a later year. This is called a reserve.

In most cases, you cannot deduct a reserve in the year of death. However, there may be a transfer to a spouse or common-law partner, or spousal or common-law partner trust, of the right to receive the proceeds of disposition or the income owing. When this happens, the legal representative and the beneficiary can choose to claim a reserve on the deceased’s return. To do this, complete Form T2069, Election in Respect of Amounts Not Deductible as Reserves for the Year of Death, and attach a copy to the deceased’s return.

This choice is available only if the deceased was a resident of Canada right before death. For a transfer to a spouse or common-law partner, that person also has to have been a resident of Canada right before the deceased’s death. For a transfer to a spousal or common-law partner trust, the trust has to be resident in Canada right after the proceeds or income become locked-in for the trust.

The spouse or common-law partner, or spousal or common-law partner trust includes in income an amount equal to the reserve that is on Form T2069. This income has to be included on the return for the first tax year after death. You have to attach a copy of Form T2069 to that return.

Lines 14400 to 14600 – Other types of income

Enter the deceased’s workers’ compensation benefits, social assistance payments, and net federal supplements on the appropriate lines. For more information on social assistance payments, see line 14500 in the Federal Income Tax and Benefit Guide.

Step 3 – Net income

Enter the amounts and claim the deductions that apply to the deceased on lines 20600 to 23500, using their information slips along with the instructions provided on the return and on any applicable worksheet, schedule, or form. In this section of the guide, you will find information that you might need in addition to the instructions on the return.

This section does not provide supplementary information for lines 20810, 21300, 21500, 21700, 21900, 22000, 22300, 22400, 23100, and 23500, as the instructions on the return or in other information products provide the information you need.

Line 20600 – Pension adjustment

If the deceased lived in Canada and participated in a pension plan in 2021, you may have to enter an amount on this line.

If the deceased participated in an eligible foreign employer‑sponsored pension plan or in an eligible foreign social security arrangement (other than a United States (U.S.) arrangement), complete Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement – Non United States Plans or Arrangements (if applicable).

If the deceased was temporarily working in Canada and continued to participate in a qualifying retirement plan offered by their employer in the U.S., complete Form RC267, Employee Contributions to a United States Retirement Plan – Temporary Assignments (if applicable).

If the deceased was a Canadian resident who travelled to work in the U.S. and participated in their employer’s qualifying retirement plan in the U.S., complete Form RC268, Employee Contributions to a United States Retirement Plan – Cross-Border Commuters (if applicable).

Line 20700 – Registered pension plan (RPP) deduction

Generally, you can deduct the total of all amounts shown in box 20 of the deceased’s T4 slips, in box 032 of their T4A slips, and on their union or RPP receipts. See Guide T4040, RRSPs and Other Registered Plans for Retirement, to find out how much you can deduct if any of the following apply:

The deceased contributed more than $3,500 to an RPP and their information slips show a past service amount for service before 1990.
The deceased contributed an amount to an RPP in a previous year, for a period before 1990, and they have not fully deducted that amount.

Note

If the deceased made contributions to a pension plan in a foreign country, you may be able to deduct the contributions. To find out how much you can deduct, see the forms listed under line 20600.

Line 20800 – RRSP deduction

Use this line to deduct contributions the deceased made before their death to their own registered retirement savings plan (RRSP ), specified pension plan (SPP), or pooled registered pension plan (PRPP ), and to the deceased’s spouse or common‑law partner’s RRSPs, or SPPs, but do not include repayments under a Home Buyers’ Plan or Lifelong Learning Plan.

Specified Pension Plan (SPP) contributions generally have the same rules as RRSP contributions. Presently, the only SPP is the Saskatchewan Pension Plan. For more information , visit Saskatchewan Pension Plan.

A PRPP is a retirement savings option for individuals, including those who are self-employed, who do not have access to a workplace pension plan. For more information, go to The pooled registered pension plan (PRPP) or see Guide T4040, RRSPs and Other Registered Plans for Retirement.

After a person dies, no one can contribute to the deceased person’s RRSPs , PRPPs, or SPPs. However, the deceased individual’s legal representative can make contributions to the surviving spouse’s or common‑law partner’s RRSPs or SPPs in the year of death or during the first 60 days after the end of that year.

The amount you can deduct on the deceased’s return for 2021 is usually based on the deceased’s 2021 RRSP deduction limit. You can also deduct amounts for contributions the deceased made for certain amounts the deceased received and transferred to an RRSP, RPP, or PRPP.

Line 21000 – Deduction for elected split-pension amount

If the deceased person jointly elected with their spouse or common-law partner to split pension income by completing Form T1032, Joint Election to Split Pension Income, the transferring spouse or common-law partner can deduct on this line, the elected split-pension amount from line G of that form.

Both the deceased person and their spouse or common-law partner must have signed the Form T1032. If the form is being completed after the date of death, the surviving spouse or common-law partner and the legal representative of the deceased person’s estate must sign the form. In some cases, the legal representative may be the spouse or common-law partner in which case this person must sign for the deceased person too.

Line 21200 – Annual union, professional, or like dues

Claim the total of the following amounts related to employment that the deceased paid (or that was paid for the deceased and reported as income) in the year:

annual dues for membership in a trade union or an association of public servants
professional board dues required under provincial or territorial law
professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law
parity or advisory committee (or similar body) dues required under provincial or territorial law

For more information, see interpretation bulletins IT-103R, Dues Paid to a Union or to a Parity or Advisory Committee, and IT-158R2, Employees’ Professional Membership Dues.

Line 21400 – Child care expenses

Use this line to deduct amounts the deceased or their spouse or common‑law partner paid to have someone look after their child so that they could earn employment or self‑employment income, go to school, or do research. The expenses are deductible only if the child was under 16 years of age or had an impairment in physical or mental functions at some time in 2021.

Note

If the deceased received employment insurance benefits, provincial parental insurance plan benefits, or COVID‑19-related income replacement benefits in 2021, you may be able to claim eligible child care expenses that the deceased paid even if the deceased did not do any of the following:

earn employment or self-employment income
go to school
do research

For more information, see Form T778, Child Care Expenses Deduction.

Line 22100 – Carrying charges and interest expenses

For information on carrying charges and interest expenses that the deceased may have paid to earn income from investments, see line 22100 of the Federal Income Tax and Benefit guide

Line 22215 – Deduction for CPP or QPP enhanced contributions on employment income

Use this line to deduct the enhanced contributions on CPP and QPP pensionable earnings the deceased contributed through their employment income.

Whether the deceased contributed to the CPP or QPP, the maximum allowable claim is $290.50.

For more information, see Schedule 8 or Form RC381, whichever applies.

Line 23200 – Other deductions

Claim the allowable amounts not deducted anywhere else on the return. Specify the deduction you are claiming in the space provided on the return.

If the deceased repaid provincial or territorial COVID‑19 benefits in 2021 for an overpayment of provincial or territorial COVID-19 benefits received in 2020, the amount repaid will be reported in box 201 of the deceased’s T4A slip.

For more information, see line 23200 in the Federal Income Tax and Benefit Guide.

Line 23210 – Federal COVID-19 benefits repayment

If the deceased repaid federal COVID 19 benefits (CERB, CRB, CRCB, CRSB or CESB) in 2021 for an overpayment of COVID 19 benefits that they received in 2020, you can claim a deduction for the repayment.

For more information, see line 23210 in the Federal Income Tax and Benefit Guide

Step 4 – Taxable income

Line 25300 – Net capital losses of other years

For information about these losses, see Chapter 5.

For information on other deductions the deceased may be entitled to claim, see the following publications:

for lines 24400, 24900, and 25000, see the instructions provided on the return
for line 25400, see Guide T4037, Capital Gains and Form T657, Calculation of Capital Gains Deduction for 2021
for line 25500, see Information sheet RC4650, Northern Residents Deductions for 2021 or Form T2222, Northern Residents Deductions for 2021
for line 25600, see the Federal Income Tax and Benefit Guide.

Step 5 – Federal tax

Personal amounts (lines 30000 to 30450 and 30500 of the final return)

If the deceased was a resident of Canada from January 1 to the date of death, claim the full personal amounts.

If the deceased was a resident of Canada for part of the time from January 1 to the date of death, you may have to prorate the personal amounts. To do so, multiply the personal amount by the number of days the deceased lived in Canada and divide the result by the number of days in the year. The result is the amount you can claim on the deceased’s return. If the deceased immigrated to Canada in the year of death, see Pamphlet T4055, Newcomers to Canada. If the deceased emigrated from Canada in the year of death, see Leaving Canada (emigrants).

The credits referred to in this section are federal credits, which are claimed on the deceased’s return. If the deceased was a resident of a province or territory other than Quebec, use the appropriate form included in the income tax package to calculate their provincial or territorial tax credits.

Line 30000 – Basic personal amount

See line 30000 on the return to calculate the basic personal amount for the year.

Line 30100 – Age amount

If the deceased was 65 or older, and their net income is less than $90,313, you can claim all or part of the age amount. The amount you can claim will depend on the deceased’s net income for the year. See line line 30100 of the Federal Federal Worksheet.

Line 30300 – Spouse or common-law partner amount

If the net income of the spouse or common law partner is less than the basic personal amount for the deceased (or the basic personal amount plus $2,295, if the spouse or common-law partner was dependent on the deceased because of an impairment in physical or mental functions – see line 30300 in the Federal Income Tax and Benefit Guide), you may be able to claim all or part of this amount. Use the net income of the spouse or common law partner for the whole year, not just up to the deceased’s date of death.

Line 30400 – Amount for an eligible dependant

If the deceased is entitled to claim this amount, use the dependant’s net income for the whole year, not just up to the deceased’s date of death. Calculate the amount for line 30400 on Schedule 5, and enter it on the deceased’s return. For more information, see line 30400 in the Federal Income Tax and Benefit Guide. Both the guide and Schedule 5 are included in the Income Tax Package.

Line 30425 – Canada caregiver amount for spouse or common-law partner, or eligible dependant age 18 or older

You may be able to claim this amount if the deceased cared for their spouse or common-law partner or an eligible dependant 18 years of age or older. Calculate the amount for line 30425 on Schedule 5, and enter it on the deceased’s return. Schedule 5 is included in the income tax package. For more information, see Guide RC4064, Disability-Related Information.

Line 30450 – Canada caregiver amount for other infirm dependants age 18 or older

If the deceased is entitled to claim this amount, use the dependant’s net income for the whole year, not just up to the deceased’s date of death. Calculate the amount for line 30450 on Schedule 5 and enter it on the deceased’s return. Schedule 5 is included in the income tax package.

Lines 30499 and 30500 – Canada caregiver amount for infirm children under 18 years of age

You can claim an amount for the deceased for each of the deceased’s or the deceased’s spouse’s or common-law partner’s children who meets all of the following conditions:

they are under 18 years of age at the end of the year
they lived with both the deceased and the deceased’s spouse or common-law partner throughout the year (or up to the date of death in the case of the deceased)
they are dependent on others because of an impairment in physical or mental functions and will likely continue to be dependent on others for an indefinite duration

There are also certain situations where you can claim this amount for the deceased, even if the child did not live throughout the year with the deceased and the deceased’s spouse or common-law partner.

For more information go to Line 30500 – Canada caregiver amount for infirm children under 18 years of age.

Line 30800 – CPP or QPP contributions through employment

There are limits on how much can be claimed for the deceased’s contributions to the CPP, QPP, or both. These limits depend in part on whether the deceased was a resident of Quebec or another province or territory on the date of death.

Generally, if the deceased contributed less than the maximum, you can contribute for them, 10. 9% on any part of the income on which they have not already made contributions.

To calculate and make additional CPP contributions for 2021, complete Form CPT20, Election to Pay Canada Pension Plan Contributions, and Schedule 8 or Form RC381, whichever applies. Form CPT20 lists the eligible employment income where additional CPP contributions can be made.

For more information, see line 30800 in the Federal Income Tax and Benefit Guide.

Line 31260 – Canada employment amount

Employees are eligible to claim whichever of the following amounts is less:

$1,257
the total of the employment income entered on line 10100 and line 10400 of the deceased’s final return

Line 31285 – Home accessibility expenses

If the deceased was a qualifying individual or an eligible individual making a claim for a qualifying individual, you may be able to claim up to $10,000 on the deceased’s final return for eligible expenses incurred for renovations to an eligible dwelling to make it more accessible.

A qualifying individual is an individual who is eligible for the disability tax credit at any time in a tax year, or an individual who is 65 years of age or older at the end of a tax year. If an individual died in 2021 prior to turning 65 but would have turned 65 during 2021 had they been alive, the individual is considered to be a qualifying individual.

For more information, see the Federal Worksheet, or go to line 31285.

Line 31350 – Digital news subscription expenses

You can claim for the deceased up to $500 for amounts paid in 2021 for qualifying subscription expenses.

A qualifying subscription expense is the amount a subscriber paid in the year for a digital news subscription with a qualified Canadian journalism organization (QCJO) that does not hold a licence to carry on a broadcasting undertaking. To qualify, a digital news subscription must give access to digital content that is primarily written news.

For more information, see line 31350 in the Federal Income Tax and Benefit Guide.

Line 31400 – Pension income amount

The deceased may have received eligible pension or annuity income before the date of death. If this is the case, you may be able to claim the pension income amount of up to $2,000. Complete the chart for line 31400 on the Federal Worksheet included in the income tax package.

If the deceased and their spouse or common-law partner elected to split pension income, follow the instructions at Step 4 on Form T1032, Joint Election to Split Pension Income, to calculate the amount to enter on line 31400.

Line 31600 – Disability amount (for self)

You can claim a disability amount if the deceased met certain conditions. For more information about these conditions, see Guide RC4064, Disability-Related Information.

Tax Tip

If the deceased or anyone else paid for certain eligible expenses, such as an attendant or for care in a nursing home or other establishment because of the deceased’s impairment, it may be more beneficial to claim the amounts paid as medical expenses instead of the disability amount. In some circumstances, both amounts can be claimed.

For more information, see “Attendant care and care in a facility” in Guide RC4065, Medical Expenses, and Income Tax Folio S1-F1-C1, Medical Expense Tax Credit.

Line 31800 – Disability amount transferred from a dependant

If the deceased had a dependant who is eligible for the disability tax credit, you may be able to claim all or a part of the dependant’s disability amount. For more information, see line 31800 in the Federal Income Tax and Benefit Guide, and complete the chart for line 31800 on the Federal Worksheet included in the income tax package.

Line 31900 – Interest paid on your student loans

You may be able to claim an amount for interest paid in 2021 or the preceding five years on loans made to the deceased under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or similar provincial or territorial government laws for post-secondary education. Enter the total amount shown on the receipts. Attach the receipts to the final return. For more information, see Pamphlet P105, Students and Income Tax.

Line 32300 – Your tuition, education, and textbook amounts

Complete Schedule 11 to calculate the total eligible tuition, education, and textbook amounts for the deceased. Enter the amount you are claiming on line 32300.

For more information, read Guide P105, Students and Income Tax.

Line 32600 – Amounts transferred from your spouse or common-law partner

Sometimes there are amounts that the deceased’s spouse or common-law partner does not need to reduce their federal income tax to zero. In these situations, you can transfer the remaining amounts to the deceased’s final return.

Also, the deceased may have amounts that are not needed to reduce their federal tax to zero. If this is the case, you can transfer the remaining amounts to the return of the spouse or common-law partner. However, before you can do this, you have to reduce the federal tax to zero on the final return you file for the deceased.

For either situation, you can transfer the following amounts if the person transferring the credit meets all of the following requirements for the credit:

the age amount (line 30100)
the Canada caregiver amount for infirm children under 18 years of age (line 30500)
the pension income amount (line 31400)
the disability amount (line 31600)
tuition amount (line 32300)

If you do transfer any of these amounts, complete Schedule 2, Federal Amounts Transferred From Your Spouse or Common-law Partner, and attach it to the final return for the deceased.

Line 33099 – Medical expenses for self, spouse or common-law partner, and dependent children born in 2004 or later

You can claim medical expenses for the deceased that are more than whichever of the following amounts is less:

$2,421
3% of the total of the deceased’s net incomes from line 23600 of all returns for the year of death

The medical expenses incurred on behalf of the deceased can be for any 24-month period that includes the date of death, as long as no one has claimed them on any other return.

Attach the receipts for medical expenses to the return.

Note

You may be able to claim a credit of up to $1,285 if you have an amount on line 21500, “Disability supports deduction,” or line 33200, the allowable portion of medical expenses. Use the net income from the deceased’s final return, and the spouse’s or common-law partner’s net income for the entire year, to calculate this credit. For details, see line 45200, “Refundable medical expense supplement,” in the Federal Income Tax and Benefit Guide.

For more information on medical expenses, see line 33099 in the Federal Income Tax and Benefit Guide.

Line 34900 – Donations and gifts

Use this line to claim charitable donations the deceased, or their spouse or common-law partner, made before the date of death and complete Schedule 9, Donations and Gifts.

Support the claims for donations and gifts with official donation receipts that the registered charity or other qualified donee has issued, showing either the deceased’s name, or the deceased’s spouse’s or common-law partner’s name. Qualified donee is defined in Definitions.

Estate donations (donations made by will and designation donations) are deemed to be made by the individual’s estate and where certain conditions are met, by the individual’s graduated rate estate (GRE).

GRE donations are donations by a GRE to a qualified donee. The donated property must be property that was acquired by the estate on and as a consequence of the death (or property that was substituted for such property). GRE donations include those made through the will and designation donations.

A designation donation is a donation of a direct distribution of proceeds to a qualified donee from an RRSP (including a group RRSP), RRIF, a tax-free savings account (TFSA), or a life insurance policy (including a group life insurance policy) as a result of a beneficiary designation. The above does not apply if the qualified donee is the policyholder or an assignee of the deceased person’s interest in the policy.

You can allocate a GRE donation among any of the following:

the taxation year of the GRE in which the donation is made
an earlier taxation year of the GRE
the last two taxation years of the deceased individual (the final return and the return for the preceding year)

In addition, a gift made after the 36-month period but within 60 months after the date of death by a former GRE that continues to meet all of the requirements of a GRE except for the 36-month time limit, can be allocated among any of the following:

the taxation year of the estate in which the donation is made
an earlier taxation year of the estate if the estate was a GRE in that preceding year
the last two taxation years of the deceased individual (the final return and the return for the preceding year)

An estate, whether it is a GRE or not, can claim a charitable donations tax credit for an estate donation in the year in which the donation is made or in any of the 5 following years (or 10 years for a gift of certified ecologically sensitive land made after February 10, 2014).

As the legal representative, you must attach supporting documentation for the donations made. The type of supporting documentation you have to provide depends on when the registered charity or other qualified donee will receive the gift.

For gifts that will be received right away, provide an official donation receipt.

For gifts that will be received later, provide a copy of all of the following:

the will
a letter from the estate to the charitable organization that will receive the gift, advising of the gift, a description of the property being gifted and its estimated value
a letter from the charitable organization acknowledging the gift and stating that it will accept the gift
a statement or letter from the legal representative of the estate stating all of the following:
- the estate is the graduated rate estate (GRE) of the deceased individual and will be designating itself as such
- the estate intends to make the gift within 60 months after the date of death
- the amount of the gift claimed on the final return of the deceased individual will not be claimed on any other return (of any estate of the deceased individual in any taxation year)
- for non-cash gifts, the value of the future gift can be reasonably ascertained and supported

Generally, when an individual dies, the individual is deemed to have disposed of all capital property immediately before the individual’s death.

Where the estate of an individual donates property that was the subject of a deemed disposition by the individual immediately before the individual’s death, and the property’s fair market value upon transfer to the qualified donee has changed, the difference will result in a gain or loss to the estate that will generally be recognized for income tax purposes. This will be the case whether or not the donation is a GRE donation or a former GRE donation.

If the property is certified cultural property or ordinarily benefits from a capital gains inclusion rate of zero, see the sections called “Gifts of certified cultural property” and “Capital gains realized on gifts of certain capital property” in Pamphlet P113, Gifts and Income Tax. The same treatment will apply to the capital gains on the deemed disposition of the property immediately before the individual’s death if the property donated meets both of the following conditions:

The property benefits from a capital gains exemption or exclusion when donated as described in the sections of Pamphlet P113 referenced above.
The estate is a GRE and the donation is a GRE donation.

This treatment will also apply to former GRE donations.

Additional special rules exist for the proceeds of disposition and cost amount of gifts of art, from the artist’s inventory, on and as a consequence of the artist’s death.

The deceased may have donated amounts in the five years before the year of death. As long as the deceased did not previously claim the amounts, you can claim them in the year of death. Where part of a donation has already been claimed, attach a note to the return giving the amounts and the year or years the donations were made. Also, attach any receipts that were not attached to previous returns, if applicable.

Note

Charitable donations cannot be carried forward from a T1 return to a T3 return.

The amount of the gift(s) that may be claimed on the deceased’s final return for purposes of the tax credit may be up to whichever of the following amounts is less:

the eligible amount of the gift(s), made in the year of death (this may include gifts made by a GRE or a former GRE), plus the unclaimed portion of the eligible amount of any gifts made in the five years before the year of death
100% of the deceased’s net income on line 23600 on the return

For a gift of property made to a qualified donee, special rules may apply to limit the fair market value (FMV) of the property gifted, which limits the eligible amount of the gift that can be used in computing the donation tax credit amount. When the rules apply, the FMV of the donated property will be deemed to be the lesser of the property’s:

FMV otherwise determined
cost (or its adjusted cost base if it is capital property, or adjusted cost basis if it is a life insurance policy at the time the gift was made)

Fair market value and adjusted cost base (ACB) are defined in Definitions.

The limitation on the eligible amount of a gift will apply where:

the donated property was acquired as part of a gifting arrangement that is a tax shelter
the property is being gifted otherwise than as a consequence of the taxpayer’s death, and the property was acquired less than 3 years, or in some cases, less than 10 years, before making the gift

The limitation on the eligible amount of a gift will not apply to gifts of any of the following:

inventory
real property or an immovable property located in Canada
certified cultural property (unless it was acquired as part of a gifting arrangement that is a tax shelter)
certified ecologically sensitive land including a covenant, an easement, or in the case of land in Quebec, a real servitude (or for gifts made after March 21, 2017, a personal servitude when certain conditions are met)
a share, debt obligation, or right listed on a designated stock exchange
a share of the capital stock of a mutual fund corporation
a unit of a mutual fund trust
an interest in a related segregated fund trust
a prescribed debt obligation
shares of controlled corporations in certain circumstances

There are also special anti-avoidance rules that may apply where a taxpayer has attempted to avoid the application of the limitation rules. For more information, see Pamphlet P113, Gifts and Income Tax.

If the property was acquired as part of a gifting arrangement that is a tax shelter, the eligible amount will be reported in box 13 of T5003 slip, Statement of Tax Shelter Information.

Sometimes, a capital property is gifted. At the time the property is gifted to a qualified donee, its FMV may be more than its ACB.

When the FMV is more than the ACB, you may designate an amount that is less than the FMV to be the proceeds of disposition. This may allow you to reduce the capital gain otherwise calculated. If you choose to designate an amount that is less than the FMV as the amount to be used as the proceeds of disposition, this amount will be used to determine the eligible amount of the donation. You can choose to designate an amount that is not greater than the FMV and not less than the greater of:

any advantage in respect of the gift
the ACB of the property (or, where the property was depreciable property, the lesser of its ACB and the undepreciated capital cost of the class of the property), at the time you made the donation

Treat the amount you choose as the proceeds of disposition when you calculate any capital gain.

For more information about charitable donations and the special rules that may apply, see the Federal Income Tax and Benefit Guide, Pamphlet P113, Gifts and Income Tax, or Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value.

Step 6 – Refund or balance owing

Enter the amounts that apply to the deceased on lines 42000 to 48200 using the information slips along with the instructions provided in Step 6 of the return, and on any applicable worksheet, schedule, and form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

Use Form 428 included in the income tax package to calculate the provincial or territorial tax for the province or territory where the deceased was living at the time of death. To calculate the tax for the province of Quebec, you must use a Quebec provincial return.

This section does not provide supplementary information for lines 42000, 42100, 42120, 42200, 43200, 44000, 44800, 45000, 45400 – 45700, 47600, or 47900 as the instructions on the return or in other information products provide the information you need.

You will find the details you need about tax and credits under “Part C – Net federal tax” in the Federal Income Tax and Benefit Guide.

Note

The CRA cannot accept direct deposit applications for individuals who died in the year, or the preceding year.

Minimum tax

Minimum tax limits the tax advantage a person can receive in a year from certain incentives. Minimum tax does not apply to a person for the year of death. However, the deceased may have paid this tax in one or more of the 7 years before the year of death. If this is the case, you may be able to deduct part or all of the minimum tax the deceased paid in those years from the tax owing for the year of death. To do this, complete Part 8 of Form T691, Alternative Minimum Tax. Attach Form T691 to the return.

Line 43700 – Total income tax deducted

If the deceased was a resident of a province other than Quebec on the date of death, claim the total of the amounts shown in the “Income tax deducted” box of all their Canadian information slips. If applicable, claim the total of the amount of tax determined on Form T1032, Joint Election to Split Pension Income. If the deceased had Quebec provincial income tax withheld from income, include those amounts on this line.

If the deceased was a resident of Quebec on the date of death, claim the total of the amounts shown in the “Income tax deducted” box of all their Canadian information slips. If applicable, claim the total of the amount of tax determined on Form T1032, Joint Election to Split Pension Income. Do not include on this return any of their Quebec provincial income tax deducted. Instead, claim it on their provincial income tax return for Quebec.

Line 45300 – Canada workers benefit (CWB)

If the deceased died after June 30, they may qualify for the CWB. This benefit is for low- income individuals and families who have earned income from employment or business.

For more information, see Schedule 6 which is included in the income tax package.

Line 45350 – Canada training credit (CTC)

You can claim for the deceased the CTC for eligible tuition and other fees paid to an eligible educational institution in Canada for courses they took in 2021, or fees they paid to certain bodies, in respect of an occupational, trade or professional examination taken in 2021.

For more information see line 45350 in the Federal Income Tax and Benefit Guide, or see Guide P105, Students and Income Tax.

Line 46900 – Eligible educator school supply tax credit

If the deceased was an eligible educator, you can claim up to $1,000 for the cost of eligible supplies expenses the deceased paid for items used in 2021 for teaching or facilitating students’ learning.

For more information see line 46900 in the Federal Income Tax and Benefit Guide.

Line 47555 – Canadian journalism labour tax credit (CJLTC)

If the deceased was a member (other than a specified member) of a partnership that was a qualifying journalism organization in 2021, claim the CJLTC allocated to them by the partnership. The amount that can be claimed for the deceased is shown in box 236 of their T5013 slip for 2021.

For more information see line 47555 in the Federal Income Tax and Benefit Guide.

Signing the return

As the legal representative for the deceased, you have to sign the return in the area provided on the last page of the return. Sign your name and indicate your title (for example, executor or administrator).

Chapter 3 – Optional returns

Optional returns are returns on which you report some of the income that you would otherwise report on the final return. By filing one or more optional returns, you may reduce or eliminate tax for the deceased. This is possible because you can claim certain amounts more than once, split them between returns, or claim them against specific kinds of income.

Chart 1 summarizes the information in this chapter. You may also want to get Archived Interpretation Bulletin IT-326, Returns of Deceased Persons as “Another Person.”

You may be able to file an optional return for each of the following:

return for rights or things.
return for a partner or proprietor.
return for income from a graduated rate estate.

Note

Do not confuse the optional return for income from a graduated rate estate with the T3 Trust Income Tax and Information Return, described in What are your responsibilities as the legal representative? After someone dies, a will or a court order may create a trust, and the trustee, executor, or administrator may be required to file a T3 return. Also, an individual may be required to file a T3 return to report income earned after the date of death or for CPP or QPP death benefits. For more information, see Chart 2 and the T4013, T3 Trust Guide.

Signing an optional return

You have to sign an optional return in the area provided on the last page of the return. Sign your name and indicate your title (for example, executor or administrator).

What are the three optional returns?

1. 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 Archived interpretation bulletins IT212-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

How to file – If you decide to file a return for rights or things, you will need to:

Get an income tax and benefit return.
Write “70(2)” in the top right corner of page 1 of the return.
Follow the instructions in this guide and the Federal Income Tax and Benefit Guide.

You have to file this return by the later of:

90 days after the CRA sends the notice of assessment or notice of reassessment for the final return
one year after the date of death

However, the due date for any balance of tax owing on a rights or things return depends on the date of death. See What is the due date for a balance owing?

Election to delay payment of income tax

In some cases, you can delay paying part of the amount owing from rights or things. However, the CRA still charges interest on any unpaid amount from the day after the due date to the date you pay the amount in full.

If you want to delay payment, you will have to give the CRA security for the amount owing. You also have to complete Form T2075, Election to Defer Payment of Income Tax, under subsection 159(5) of the Income Tax Act by a Deceased Taxpayer’s Legal Representative or Trustee.

For more information, call 1-888-863-8657.

How to cancel a return for rights or things

If you file a return for rights or things before the due date, but later want to cancel it, the CRA will cancel the return if, on or before the filing due date for the rights or things return, you send the CRA a note asking for the return to be cancelled.

2. Return for a partner or proprietor

A deceased person may have been a partner in, or the sole proprietor of, a business. The business may have a fiscal year that does not start or end on the same dates as the calendar year. If the person died after the end of the business’s fiscal period but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.

If you choose not to file this optional return, report all business income on the final return.

Example

A person who had a business died on May 28, 2021. The business has a March 31 fiscal year-end.

You have two choices when you report the person’s 2021 income:

include the business income from April 1, 2020, to May 28, 2021 on the final return.
file a return for a partner or proprietor in addition to the final return.
- On the final return, include business income from April 1, 2020, to March 31, 2021.
- On the return for a partner or proprietor, report the business income from April 1, 2021, to May 28, 2021.

How to file – If you decide to file an optional return for a partner or proprietor, you will need to:

Get an Income Tax and Benefit Return.
Write “150(4)” in the top right corner of page 1 of the return.
Follow the instructions in this guide and the Federal Income Tax and Benefit Guide.
To determine the business income to be reported on the final return and the optional return, follow the instructions in the section “Death of a partner or proprietor in the year,” on Form T1139, Reconciliation of 2021 Business Income for Tax Purposes.

The due date for this optional return is the same as for the final return. The due date for a balance owing depends on the date of death. See What date is the final return due? and What is the due date for a balance owing?

For more information, see Archived Interpretation Bulletin IT278- Death of a Partner or of a Retired Partner.

3. Return for income from a graduated rate estate

You can file an optional return for a deceased person who received income from a graduated rate estate (GRE). The GRE may have a fiscal period (tax year) that does not start or end on the same dates as the calendar year. If the person died after the end of the fiscal period of the GRE, but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.

On this return, report the income for the time from the end of the fiscal period to the date of death. If you choose not to file this optional return, report all income from the GRE on the final return.

Example

A husband gets income from a testamentary trust with a fiscal year from April 1 to March 31. The trust was formed as a result of his wife’s death on March 31, 2020 and designates itself as a GRE of the wife in its return of income for March 31, 2021. The husband died on June 11, 2021.

You have two choices when you report the husband’s income from the trust:

Include the husband’s income from the GRE from April 1, 2020, to June 11, 2021, on his final return.
File a return for income received from the GRE in addition to the final return.
- On the husband’s final return, include the income from the GRE from April 1, 2020, to March 31, 2021.
- On the optional return for income from the GRE, report the income from April 1, 2021, to June 11, 2021.

How to file – If you decide to file a return for income from a graduated rate estate, you will need to:

Get an Income Tax and Benefit Return.
Write “104(23)(d)” in the top right corner of page 1 of the return.
Follow the instructions in this guide and the Federal Income Tax and Benefit Guide.

You have to file this optional return and pay any amount owing by the later of:

April 30, 2022 (or June 15, 2022, if the deceased was a self-employed individual, although any balance owing is still due on April 30)
6 months after the date of death

Amounts for optional returns

There are three groups of amounts you can claim on the optional returns. They are amounts you can:

claim in full on each return
split between returns
claim only against certain income

Amounts you can claim in full on each return

On each optional return and on the final return, you can claim:

the basic personal amount (line 30000)
the age amount (line 30100)
the spouse or common-law partner amount (line 30300)
the amount for an eligible dependant (line 30400)
the Canada caregiver amount for spouse or common-law partner, or eligible dependant age 18 or older (line 30425)
the Canada caregiver amount for other infirm dependants age 18 or older (line 30450)
the Canada caregiver amount for infirm children under 18 years of age (line 30500)

Amounts you can split between returns

There are certain amounts you cannot claim in full on the final return and optional returns. However, you can split these amounts between the returns.

When you split an amount, the total of the claims cannot be more than what would have been allowed if you were only filing the final return. Amounts you can split are:

adoption expenses (line 31300)
disability amount for the deceased (line 31600)
disability amount transferred from a dependant (line 31800)
interest paid on certain student loans (line 31900)
tuition, education, and textbook amounts for the deceased (line 32300)
tuition amount transferred from a child (line 32400)
charitable donations (line 34900) that are not more than the net income (line 23500) from that return
cultural, ecological, and Crown gifts (line 34200 of Schedule 9)
home buyers’ amount (line 31270)
home accessibility expenses (line 31285)
medical expenses (line 33099), which you can split any way you want between the final return and any optional returns

Example

In 2021, a woman died and her total medical expenses were $9,000. You decide to file a rights or things return in addition to the final return. The total of her net income on the two returns is $40,000. Of this, $30,000 is on the final return and $10,000 is on the rights or things return.

You decide to split the $9,000 of medical expenses and claim 2/3 on the final return and 1/3 on the rights or things return.

2/3 of $9,000

$6,000 (to claim on final return)

1/3 of $9,000

$3,000 (to claim on rights or things return)

The medical expense reduction is the lesser of $2,421 or 3% of the total net income. In this example, the reduction is $1,200 ($40,000 x 3%), which is less than $2,421.

The medical expense reduction must also be split between the 2 returns in the same proportion as the medical expenses.

2/3 of $1,200

$800

1/3 of $1,200

$400

Amounts for medical expenses on final return

$6,000 − $800 = $5,200

Amounts for medical expenses on rights or things return

$3,000 − $400 = $2,600

The amounts for medical expenses are $5,200 on the final return and $2,600 on the rights or things return.

Amounts you can claim only against certain income

There are some amounts you can only claim on those returns on which you report the related income. The amounts are:

Canadian Forces personnel and police deduction (line 24400)
security options deductions (stock options and shares) (line 24900)
vow of perpetual poverty deduction (line 25600)
Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions (line 30800 or line 31000)
employment insurance premiums (line 31200)
Canada employment amount (line 31260)
pension income amount (line 31400)
federal dividend tax credit (line 40425)
social benefits repayment (line 42200)

Example

A deceased person’s total employment income in the year of death was $30,000, and the CPP contribution was $800. Of the $30,000, $1,000 is a right or thing. Of the $800, $27 is the CPP contribution the person paid on the $1,000. You decide to file a return for rights or things.

On the final return, you report income of $29,000 and claim a CPP contribution of $773. On the return for rights or things, you include income of $1,000 and claim a CPP contribution of $27.

There are certain amounts you cannot normally claim on an optional return. They include:

registered pension plan (RPP) deduction (line 20700)
registered retirement savings plan (RRSP) deduction (line 20800)
annual union, professional, or like dues (line 21200)
child care expenses (line 21400)
disability supports deduction (line 21500)
allowable business investment losses (ABILs) (line 21700)
moving expenses (line 21900)
support payments made (line 22000)
carrying charges and interest expenses (line 22100)
exploration and development expenses (line 22400)
losses from other years (lines 25100 to 25300)
capital gains deduction (line 25400)
northern residents deduction (line 25500)
amounts transferred from a spouse or common-law partner (line 32600)

You may be able to claim these amounts on the final return.

For more information on other credits, see Chart 1.

Chapter 4 – Deemed disposition of property

This chapter gives information on the tax treatment of capital property the deceased owned at the date of death. It discusses capital property in general, as well as the particular treatment of depreciable and farm and fishing property. Only property acquired after December 31, 1971, is discussed.

There are special rules for property that a deceased person owned before 1972. For details about these rules and for information about other property such as resource property or an inventory of land, contact the CRA at 1-800-959-8281.

Some of the terms in this chapter are defined under Definitions.

General information

When a person dies, the CRA considers that the person has disposed of all capital property right before death. The CRA calls this a deemed disposition. This is applicable to all persons, regardless of where they reside.

Also, right before death, the CRA considers that the person has received the deemed proceeds of disposition (throughout this chapter, this will be referred to as deemed proceeds). Even though there was not an actual sale, there can be a capital gain or, except for depreciable property or personal-use property, a capital loss.

For depreciable property, in addition to a capital gain, there can be a recapture of capital cost allowance. Also, for depreciable property, instead of a capital loss there may be a terminal loss. These terms are explained below.

What is a capital gain?

When the proceeds or deemed proceeds of disposition of a capital property are more than its adjusted cost base, the result is a capital gain. In most cases, one-half of the capital gain is the taxable capital gain.

Use Schedule 3, Capital Gains (or Losses) in 2021, to calculate the taxable capital gain to report on the final return.

What is a capital gains deduction?

This is a deduction you can claim for the deceased person against eligible taxable capital gains from the disposition or deemed disposition of certain capital property.

You may be able to claim the capital gains deduction on taxable capital gains the deceased had in 2021 from any of the following:

dispositions or deemed dispositions of qualified farm or fishing property
dispositions or deemed dispositions of qualified small business corporation (QSBC) shares
a reserve brought into income from either of the above

The lifetime capital gains exemption (LCGE) is $892,218 for dispositions of QSBC shares in 2021. Since the inclusion rate for capital gains and losses is 50%, the lifetime capital gains deduction limit is $446,109 (50% of $892,218) for dispositions of QSBC shares in 2021.

For dispositions of qualified farm or fishing property, an additional deduction is available which increases the LCGE limit to $1,000,000. Accordingly, the lifetime capital gains deduction limit is increased to $500,000 (50% of $1,000,000) for those properties. This additional deduction does not apply to dispositions of QSBC shares.

For more information, see Guide T4037, Capital Gains.

What is a capital loss?

When the proceeds or deemed proceeds of disposition of a capital property are less than its adjusted cost base, the result is a capital loss. One-half of the capital loss is the allowable capital loss.

You cannot have a capital loss on the disposition of depreciable property or personal use property. However, you may have a terminal loss in respect of certian depreciable property. See the next section.

For more information on claiming a capital loss, see Net capital losses in the year of death.

Recaptures and terminal losses

For depreciable property, when the proceeds or deemed proceeds of disposition are more than the undepreciated capital cost, you will usually have a recapture of capital cost allowance. Include the recapture in income on the deceased’s final return.

For depreciable property, when the proceeds or deemed proceeds of disposition are less than the undepreciated capital cost, the result is a terminal loss. Deduct the terminal loss on the deceased’s final return.

Note

A terminal loss is not allowed for depreciable property that was personal-use property of the deceased.

For more information about a recapture of capital cost allowance or a terminal loss, see Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

Deemed proceeds of disposition for capital property other than depreciable property

The rules for calculating the deemed proceeds for depreciable property are explained in Deemed proceeds of disposition for depreciable property. If there is a transfer of farm or fishing property to a child, see Deemed proceeds of disposition for farm or fishing property transferred to a child.

Principal residence

If the deceased owned (or co-owned) property that was their principal residence, there is a deemed disposition of the property on death. A principal residence designation must be made by completing page 2 of Schedule 3, Capital Gains (or Losses) in 2021 and Form T1255, Designation of a Property as a Principal Residence by the Legal Representative of a Deceased Individual.

Where the principal residence is transferred to the deceased’s spouse, common-law partner, or testamentary spousal or common-law partner trust (under the conditions described in the next section), the CRA does not require you to make a principal residence designation for the period before death. Instead, the disposition must be reported and the designation may be made by the surviving spouse, common-law partner, or the trust at the earlier of the time of actual disposition or death of the surviving spouse. Therefore, a record should be kept of the years for which the deceased individual would have been eligible to make a principal residence designation for the particular property.

For more information on the reporting requirements when there is a disposition of a principal residence, see Chapter 6 of Guide T4037, Capital Gains, and Income Tax Folio S1-F3-C2, Principal Residence.

Deceased’s deemed proceeds – Transfer to spouse or common-law partner, or testamentary spousal or common-law partner trust

There may be a transfer of capital property (including farm property, or fishing property) from a deceased person who was a resident of Canada immediately before death to a spouse or common-law partner, or a testamentary spousal or common-law partner trust.

For a transfer to a spouse or common-law partner, the deemed proceeds are the same as the property’s adjusted cost base right before death, if both of these conditions are met:

The spouse or common-law partner was a resident of Canada right before the person’s death.
The property becomes locked-in for the spouse or common-law partner no later than 36 months after the date of death. If you, as the legal representative of the deceased, need more time to meet this condition, you can make a written request to the director at your tax services office before the end of the 36-month time period.

For a transfer to a testamentary spousal or common-law partner trust, the deemed proceeds are the same as the property’s adjusted cost base right before death, if both of these conditions are met:

The testamentary spousal or common-law partner trust is resident in Canada right after the property becomes locked-in for this trust.
The property becomes locked-in for the testamentary spousal or common-law partner trust no later than 36 months after the date of death. If you need more time to meet this condition, you can make a written request to the director at your tax services office before the end of the 36-month time period.

Where these conditions are met, the deceased will not have a capital gain or loss. This is because the transfer postpones any gain or loss to the date the beneficiary actually disposes of the property.

Example

A person’s will transfers non-depreciable capital property to the spouse or common-law partner, and both of the conditions for transfer to a spouse or common-law partner are met. Right before death, the adjusted cost base of the property was $35,000. Therefore, the deemed proceeds are $35,000. You would not report any capital gain or loss on the deceased’s final return.

Tax Tip

You can elect not to have the deemed proceeds equal the adjusted cost base. If you make this choice, the deemed proceeds are equal to the property’s fair market value right before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to use a capital gains deduction (see What is a capital gains deduction?) or a net capital loss on the deceased’s final return. It may be more beneficial to report a capital gain or loss on the final return instead of deferring it to the spouse or common-law partner, or spousal or common-law partner trust.

In this situation, you may be able to make a principal residence designation by reporting the disposition on Schedule 3 and completing Form T1255, in order to claim the principal residence exemption.

Deceased’s deemed proceeds – All other transfers

For all other transfers, the deemed proceeds are equal to the property’s fair market value right before death.

Deemed proceeds of disposition for depreciable property

If there is a transfer of farm or fishing property to a child, see Farm or fishing property transferred to a child.

Deceased’s deemed proceeds – Transfer to spouse or common-law partner, or testamentary spousal or common-law partner trust

There may be a transfer of depreciable property (including depreciable farm property or fishing property) to a spouse or common-law partner, or a testamentary spousal or common-law partner trust. For these transfers, you may be able to use a special amount (as explained in the next paragraph) for the deemed proceeds. When you use this special amount, the deceased will not have a capital gain, recapture of capital cost allowance, or a terminal loss. The transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

The conditions required to use this special amount are the same as those listed for a transfer of capital property to a spouse or common-law partner, or testamentary spousal or common-law partner trust.

The special amount (deemed proceeds) is whichever of the following amounts is less:

the capital cost of the property for the deceased
the result of the following calculation:Capital cost of the property÷Capital cost of all the property in the same class that had not been disposed of previously×Undepreciated capital cost of all of the deceased’s property in the same class

Example

A woman had two trucks that were used in her business. The woman died in July 2021, and the will transferred one truck to her husband. Both of the conditions for transfer to a spouse or common-law partner are met.

You have the following details:

Undepreciated capital cost of the two trucks right before death

$33,500

Capital cost of transferred truck

$22,500

Capital cost of the two trucks

$50,000

The deceased’s deemed proceeds on the transferred truck are whichever of the following amounts is less:

$22,500
$22,500 ÷ $50,000 × $33,500 = $15,075

The deemed proceeds are $15,075.

When there is more than one property in the same class, you can choose the order in which the deceased is deemed to have disposed of the properties. When you calculate the special amount, adjust the undepreciated capital cost and the total capital cost of the properties in the class to exclude previous deemed dispositions.

Note

When determining the special amount, you will need to recalculate the capital cost of property in the class when any of the following applies:

The property was acquired in a non-arm’s length transaction.
The property was previously used for something other than gaining or producing income.
The part of a property used for gaining or producing income changed.

For more information, contact the CRA at 1-800-959-8281.

Tax Tip

You can elect not to use the special amount for the deemed proceeds. If you make this choice, the deemed proceeds are equal to the property’s fair market value right before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to claim a capital gains deduction (see What is a capital gains deduction?) on the final return. It may be more beneficial to report a capital gain, recapture, or terminal loss on the final return instead of deferring it to the spouse or common-law partner, or spousal or common-law partner trust.

Deceased’s deemed proceeds – All other transfers

For all other transfers, the deemed proceeds are equal to the property’s fair market value right before death.

Deemed proceeds of a disposition for farm or fishing property transferred to a child

For this kind of transfer, you may be able to use a special amount for the deemed proceeds. When you use this special amount, the deceased will not have a capital gain, recapture of capital cost allowance, or a terminal loss. The transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

In this section, when referring to the transfer of farm or fishing property, the terms farm property, fishing property, and child have the following meanings:

Farm property includes land and depreciable property of a prescribed class used for farming.

Fishing property includes land and depreciable property of a prescribed class used for fishing.

A child includes:

the deceased’s natural or adopted child
the child of the deceased’s spouse or common-law partner
the deceased’s grandchild or great-grandchild
a person who, while under the age of 19, was in the deceased’s custody and control and was wholly dependent on the deceased for support
the deceased’s child’s spouse or common-law partner

Conditions

To use the special amount for the deemed proceeds, all of the following conditions have to be met:

The farm or fishing property is used principally in a farming or fishing business carried on in Canada.
The child was a resident of Canada right before the deceased’s death.
The farm or fishing property becomes locked-in for the child no later than 36 months after the date of death. If you need more time to meet this condition, you can make a written request to the director at your tax services office before the end of the 36-month period.
The deceased, the deceased’s spouse or common-law partner, or any child or parent of the deceased was using the farm or fishing property principally for farming, fishing, or a combination of both on a regular and ongoing basis, before the deceased’s death.

The rollover provisions available for farm property also apply to land and depreciable property used mainly in a woodlot farming business. They apply where the deceased, the deceased’s spouse or common-law partner, or any of the deceased’s children was engaged in the woodlot operation as required by a prescribed forest management plan in respect of the woodlot. These provisions apply to transfers of property that occur after December 10, 2001.

For more information, see Archived Interpretation Bulletin IT373 – Woodlots, or contact the CRA at 1-800-959-5525.

You may also be able to use a special amount for the deemed proceeds when a share of the capital stock of a family farm corporation or an interest in a family farm partnership is transferred to a child.

For details, see Archived Interpretation Bulletin IT349 – Intergenerational Transfers of Farm Property on Death.

You may also be able to use a special amount for the deemed proceeds when a share of the capital stock of a family fishing corporation or an interest in a family fishing partnership is transferred to a child.

Deceased’s deemed proceeds – Transfer of farmland to a child

If all four conditions listed previously are met, you can choose to have the deemed proceeds equal to the adjusted cost base of the land right before death. Therefore, the deceased will not have a capital gain or loss.

Tax Tip

You can elect not to have the deemed proceeds equal the adjusted cost base. If you make this choice, you can transfer the land for any amount between its adjusted cost base and fair market value right before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to claim the capital gains deduction (see What is a capital gains deduction?) or a net capital loss on the final return. It may be more beneficial to report a capital gain or loss on the final return instead of deferring it to a child.

Deceased’s deemed proceeds – Transfer of depreciable farm or fishing property to a child

If there is a transfer of depreciable farm property, or depreciable fishing property, you may be able to use a special amount for the deemed proceeds. To use this special amount, the four conditions have to be met.

In most cases, when you use this special amount, the deceased will not have a capital gain, a recapture of capital cost allowance, or a terminal loss. This is because the transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

The special amount (deemed proceeds) is whichever of the following amounts is less:

the capital cost of the property for the deceased
the result of the following calculation:Capital cost of the property÷Capital cost of the property in the same class that had not been disposed of previously×Undepreciated capital cost of all of the deceased’s property in the same class

Example

A man who owned three fishing boats died in August 2021. His will transferred one boat to his son. The four conditions for transfer of fishing property to a child are met.

You have the following details:

Undepreciated capital cost of the three boats right before death

$90,000

Capital cost of the transferred boat

$45,000

Capital cost of all three boats

$100,000

The deceased’s deemed proceeds on the transferred boat are the lesser of:

$45,000
$45,000 ÷ $100,000 x $90,000 = $40,500.

The deemed proceeds are $40,500.

Note

When you determine the special amount, you will need to recalculate the capital cost of any property in the class when any of the following applies:

The property was acquired in a non-arm’s length transaction.
The property was previously used for something other than gaining or producing income.
The part of a property used for gaining or producing income changed.

For more information, call 1-800-959-5525.

Tax Tip

You can elect not to use the special amount for the deemed proceeds. If you make this choice, you can transfer the property for any amount between the special amount and its fair market value right before death. You have to make this choice when you file the final return for the deceased.

You may want to do this to claim the capital gains deduction (see What is a capital gains deduction?) on the final return. It may be more beneficial to report a capital gain, recapture, or terminal loss on the final return instead of deferring it to a child.

For more information, see Archived Interpretation Bulletin IT349 – Intergenerational Transfers of Farm Property on Death, or contact the CRA. You may also refer to Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

Election to delay payment of income tax

Generally, you have to pay any amount owing on a return when the return is due. In some cases, you can delay paying part of the income tax due. For instance, you can delay paying part of the amount owing from the deemed disposition of capital property. Remember that the CRA charges interest on any unpaid amount, from the day after the due date to the date you pay the amount in full.

Chapter 5 – Net capital losses

This chapter explains how to apply a net capital loss that was incurred in the year of death. There are also explanations on how to apply net capital losses from earlier years to the final return and the return for the year before the year of death.

Note

Net capital losses cannot be carried forward from a T1 return to a T3 return.

Some of the terms in this chapter are defined in Definitions.

What is a net capital loss?

Generally, when allowable capital losses are more than taxable capital gains, the difference is a net capital loss. The rate used to determine the taxable part of a capital gain and the allowable part of a capital loss is called an inclusion rate.

For 2021, the inclusion rate is one-half. Therefore, an allowable capital loss is one-half of a capital loss and a taxable capital gain is one-half of a capital gain.

Net capital losses in the year of death

To apply a net capital loss that was incurred in the year of death, you can use either Method A or Method B.

Method A – You can carry back a 2021 net capital loss to reduce any taxable capital gains in any of the three tax years before the year of death. If you are applying it against taxable capital gains realized in 2018, 2019, or 2020, you do not need to make any adjustment because the inclusion rate is the same in all three years. The loss you carry back cannot be more than the taxable capital gains in those years. To ask for a loss carryback, complete “Section III – Net capital loss for carryback” on Form T1A, Request for Loss Carryback, and send it to your tax centre. Do not file an amended return for the year to which you want to apply the loss.

After you carry back the loss, there may be an amount left. You may be able to use some of the remaining amount to reduce other income on the final return, the return for the year before the year of death, or both returns. However, before you do this, you have to calculate the amount you can use.

From the net capital loss you have left, subtract any capital gains deductions the deceased has claimed to date. Use any loss left to reduce other income for the year of death, the year before the year of death, or for both years.

If you claim any remaining net capital loss in the year of death, you should claim it as a negative amount in brackets at line 12700 of the final return.

Note

Do not use a capital loss claimed against other income at line 12700 in the calculation of net income for the purposes of calculating other amounts such as social benefit repayments, provincial or territorial tax credits, and those non-refundable tax credits requiring the use of net income.

Method B – You can choose not to carry back the net capital loss to reduce taxable capital gains from earlier years. You may prefer to reduce other income on the final return, the return for the year before the year of death, or both returns. However, before you do this, you have to calculate the amount you can use.

From the net capital loss, subtract any capital gains deductions the deceased has claimed to date. Use any loss remaining to reduce other income for the year of death, the year before the year of death, or for both years.

If you claim any remaining net capital loss in the year of death, you should claim it as a negative amount in brackets at line 12700 of the final return.

Example

A man died on June 20, 2021. You have the following details about his tax matters:

Net capital loss in 2021

$11,000

Taxable capital gains in 2019

$4,000

Taxable capital gains in 2018

$2,000

Total capital gains deductions claimed to date

$4,000

He did not claim any capital gains deductions for 2018 or 2019.

You can use Method A or Method B.

Method A

If you choose Method A, you can use the net capital losses to reduce his 2019 taxable capital gains to zero ($11,000 − $4,000). Then, you can use the remaining balance of $7,000 to reduce his 2018 taxable capital gain to zero ($7,000 − $2,000).

After you subtract his capital gains deductions ($5,000 − $4,000), you still have $1,000 left to reduce the man’s other income for 2021 or 2020 or for both years.

Method B

If you choose to use this method, you will first deduct his capital gains deductions of $4,000 from his net capital loss in 2021 of $11,000. You can now use the remaining $7,000 to reduce the man’s other income for 2021 or 2020, or for both years.

Note

If you claim any remaining net capital loss in the year before the year of death, you will need to complete Form T1-ADJ, T1 Adjustment Request, or send the CRA a signed letter providing the details of your request. Send your Form T1-ADJ or letter separately from the deceased’s final return. Applying a 2021 net capital loss to a previous year may reduce any capital gains deductions the deceased claimed in that year or a following year.

Net capital losses before the year of death

The deceased may have had a net capital loss before the year of death but never applied it. If so, you can apply the loss against taxable capital gains on the final return. If the net capital loss arose after 1987 and before 2001, you will need to make an adjustment to the inclusion rate as explained below. If there is still an amount left, you may be able to use it to reduce other income on the final return, the return for the year before the year of death, or both returns. If you decide to claim this loss on the final return, enter it at line 25300.

Note

You cannot use the net capital losses of other years to create a negative taxable income for any year.

You have to apply net capital losses of earlier years before you apply net capital losses of later years. For example, if you have net capital losses in 1997 and 1999 and want to apply them against your taxable capital gains in 2021, you have to follow a certain order. First, apply your 1997 net capital loss against your taxable capital gain. Then apply your 1999 net capital loss against it.

The inclusion rate used to determine the taxable part of a capital gain and the allowable part of a capital loss has changed over the years. If the inclusion rate of 1/2 for 2021 is different from the inclusion rate in effect the year the loss occurred, you will need to adjust the loss before applying it to the taxable capital gain in 2021.

To apply a previous-year loss to 2021, you will need to adjust the loss as follows:

For a net capital loss from 1987 or earlier, there is no adjustment required.
For a net capital loss from 1988 or 1989, multiply the loss by 3/4.
For a net capital loss from 1990 to 1999, multiply the loss by 2/3.
For a net capital loss from 2000, multiply the loss by [1 ÷ (2 x IR)], where IR is the inclusion rate for 2000. This rate is from line 16 of Part 4 of the deceased’s Schedule 3 for 2000, or from the deceased’s notice of assessment or latest notice of reassessment for 2000.
For a net capital loss from 2001 or later, there is no adjustment required.

When you make these calculations, you get the adjusted net capital loss.

Now you can reduce taxable capital gains in the year of death. To do this, use whichever of the following amounts is less:

the adjusted net capital loss
the taxable capital gains in the year of death

After you reduce the taxable capital gains, some of the loss may be left. You may be able to use this amount to reduce other income for the year of death, the year before the year of death, or for both years. However, before you do this, you may have to calculate the amount you can use.

If you had to adjust the loss before applying it to the 2021 taxable capital gain, you will now have to readjust the loss that remains as follows:

For a net capital loss from 1987 or earlier, there is no adjustment required.
Multiply any adjusted net capital losses from 1988 or 1989 by 4/3.
Multiply any adjusted net capital losses from 1990 to 1999 by 3/2.
Multiply any adjusted net capital losses from 2000 by 2 x IR, where IR is the inclusion rate for 2000.
For a net capital loss from 2001 or later, there is no adjustment required.

The result is your readjusted balance of net capital losses. From this balance, subtract all capital gains deductions claimed to date, including those on the final return. If there is an amount left, you can use it to reduce other income for the year of death, the year before the year of death, or for both years.

Example

A woman died in August of 2021. You have these details about her tax matters:

Net capital loss in 1999, never applied

$18,000

Taxable capital gain in 2021

$6,000

Capital gains deductions claimed to date

$4,000

You decide to use the 1999 loss to reduce the 2021 taxable capital gain and to use any amount left to reduce other income for 2021.

You have to adjust the 1999 net capital loss before you can apply it. Multiply it by 2/3 to get the adjusted net capital loss:

$18,000 x 2/3 = $12,000

To reduce the 2021 taxable capital gain, use the lesser of:

$12,000 (adjusted net capital loss)
$6,000 (2021 taxable capital gain)

After you use $6,000 of the loss to reduce the gain to zero, you still have $6,000 ($12,000 − $6,000) left. You can use this amount to reduce the deceased’s other income for 2021.

To determine the amount to use, you have to readjust the $6,000. Because the loss occurred in 1999, multiply the amount left by 3/2 to get the readjusted balance:

$6,000 x 3/2 = $9,000

From the readjusted balance, subtract all capital gains deductions claimed to date:

$9,000 − $4,000 = $5,000

You can use $5,000 to reduce the deceased’s other income for 2021. If you decide not to use the total of this balance in 2021, you can use the amount that is left to reduce other income for 2020.

Note

If you claim a capital gains deduction for the year of death or the year before the year of death, subtract it from the balance of net capital losses you have available to reduce other income in those years. For more details about capital gains and losses, as well as the capital gains deduction, see Guide T4037, Capital Gains.

Disposition of estate property by the legal representative

As the legal representative, you may continue looking after the deceased’s estate through a trust. If you dispose of capital property, the result may be a net capital loss. If you dispose of depreciable property, the result may be a terminal loss.