I-3 - Taxation Act

Section 935.26.1 Disposition versions

2010-04-20

935.26.1. If an arrangement that governs a trust ceases to be a tax-free savings account because of the death of the holder of the tax-free savings account, the following rules apply:

(a)  the arrangement is deemed, for the purposes of the third paragraph of section 647, sections 935.21 to 935.24 and 935.26 and paragraph h.1 of section 998, to continue to be a tax-free savings account until, and to cease to be a tax-free savings account immediately after, the exemption-end time;

(b)  there must be included in computing a taxpayer’s income for a taxation year the aggregate of all amounts each of which is an amount determined by the formula

A - B; and

(c)  there must be included in computing the trust’s income for its first taxation year, if any, that begins after the exemption-end time the amount determined by the formula

C - D.

In the formulas in subparagraphs b and c of the first paragraph,

(a)  A is the amount of a payment made out of or under the trust, in satisfaction of all or part of the taxpayer’s beneficial interest in the trust, in the taxation year, after the holder’s death and at or before the exemption-end time;

(b)  B is an amount designated by the trust not exceeding the lesser of

i.  the amount of the payment, and

ii.  the amount by which the fair market value of all of the property held by the trust immediately before the holder’s death exceeds the aggregate of all amounts each of which is an amount determined under this subparagraph b in respect of any other payment made out of or under the trust;

(c)  C is the fair market value of all of the property held by the trust at the exemption-end time; and

(d)  D is the amount by which the fair market value of all of the property held by the trust immediately before the holder’s death exceeds the aggregate of all amounts each of which is an amount determined under subparagraph b in respect of a payment made out of or under the trust.

For the purposes of this section, the exemption-end time is the earlier of

(a)  the time at which the trust ceases to exist; and

(b)  the end of the first calendar year that begins after the holder dies.

2010, c. 5, s. 92.