In a recent technical interpretation issued on January 27, 2015,
CRA commented on the ability of a surviving spouse or common law
partner to share donation credits arising from gifts made by the
estate of the deceased spouse. CRA commented on this issue
both in the context of the current rules that apply to estate gifts
as well as the new rules that will apply beginning in 2016.
These rules are described in a previous edition of this
CRA confirmed its existing administrative practice of allowing
donation credits to be shared between spouses and common law
partners. Under the current rules that apply to gifts made on
death, gifts by Will are deemed to have been made by the deceased
individual immediately before death. The resulting tax
credits can be claimed in the donor's last living return or the
preceding year to the extent that excess credits remain.
CRA's administrative position permits these credits to be
claimed by the surviving spouse. This assumes that a spousal
or common-law relationship existed at the time of death and the
donation would otherwise qualify as a gift for the purposes of the
charitable donations tax credit.
Under the changes to the Income Tax Act that were
introduced in the 2014 Federal Budget, the Act now codifies the
rules regarding the ability of spouses to share donation tax
credits. The new rules confirm that, in general, an
individual may claim credits in respect of gifts made by his or her
spouse or common law partner during their lifetime. This is
consistent with CRA's current administrative practice.
However, with respect to gifts on death after 2015, the new rules
are more restrictive. Under the new rules, gifts made by an
individual's graduated rate estate – i.e., within three
years of death – can be allocated to the individual's
last two living years or to the estate in the year of the gift or a
preceding year. The CRA technical interpretation issued on
January 27 states that the new changes to the Act do not allow the
surviving spouse to claim gifts made by the deceased spouse's
graduated rate estate. As such, CRA states that its current
administrative practice with respect to gifts by Will no longer
applies starting in 2016.
It thus appears that, under the new rules, surviving spouses
will no longer be able to claim credits in respect of gifts made by
the estate of their spouse or common law partner. This new
reality will need be considered in the course of estate planning
We will continue to monitor developments and CRA statements with
respect to the new rules around estate gifts, which will be
reported in this Newsletter.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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