Section 11 – Deceased Persons


All income for the period beginning January 1 to the date of death, inclusively, must be reported in the final and optional returns of a deceased taxpayer. Income earned after that date should generally be reported in the estate’s return (see point 6 of this section). These returns are similar to the returns filed by all taxpayers. The following comments focus on items that are treated differently because of the death.

Allocation of Income

Periodic amounts earned prior to death such as salary, interest, rent and most annuities must be reported in the final return even if the deceased did not receive them before the date of death. However, certain amounts owed prior to death and certain amounts considered as having matured at the time of death can be reported in an optional return.

Rights or Things

Rights or things are income amounts that the deceased was entitled to receive before the date of death but that had not yet been paid. Examples are:

  • Employment income (salaries, commissions, vacation pay) payable at the time of death for a pay period that ended before the date of death, as well as retroactive payments paid pursuant to a collective agreement signed before the date of death4;
  • Uncashed matured bond coupons;
  • Unpaid bond interest earned up to a payment date before the date of death;
  • Unpaid dividends declared before the date of death;
  • Supplies on hand, inventory and receivables if the deceased was a fisherman or farmer and used the cash method;
  • OAS, EI, QPP, CPP and QPIP benefits not received for a period ended before the date of death;
  • Work-in-process if the deceased carried on business and had elected to exclude work-in-process when calculating income5;
  • Retroactive payment of a disability annuity or EI benefit paid after the date of death but to which the deceased was entitled prior to that date.

If the legal representative elects to file an optional return, all rights or things have to be reported therein except those transferred to beneficiaries. Rights or things transferred to a beneficiary before the filing deadline for an optional return have to be reported by the beneficiary.

4 Retroactive payments received pursuant to a collective agreement signed after the date of death are not taxable.
5 This election is abolished for a taxation year beginning after March 21, 2017. The inclusion of work in process in income is progressive over a five-year period from 2018 to 2021. For details on the transitional measures see Section VI.

Income of a Partner or Sole Proprietor

The legal representative may elect to report the business income earned between the end of the fiscal year and the date of death in an optional return if the deceased carried on business as a partner or sole proprietor and used the optional method (see Section VI).

Disposition of Capital Properties

The deceased is deemed to have disposed of capital properties at FMV and to have received proceeds of disposition immediately before death. In general, properties cannot be transferred without taxing the capital gain accrued at the time of death. However, there are certain exceptions to this rule.

Spousal Rollover

When the capital property of the deceased, other than depreciable property, vests indefeasibly in a spouse or a spousal trust, the proceeds of disposition are deemed to be equal to the tax cost of the properties immediately before death, rather than the FMV, provided certain conditions are satisfied6. In such cases, the death does not result in any immediate tax considerations; such considerations are rather deferred until such time as the property is disposed of by the spouse or the spousal trust. However, the representative may elect proceeds of disposition equal to the FMV of the property in order to use tax balances, such as a loss carryover or the capital gains deduction (see Section VII).

Farm and Fishing Property

There are specific rules for farm and fishing property owned by a taxpayer at the time of death (see Section VI) when, among other things, the property is transferred to the taxpayer’s children.

6 There are specific rules for depreciable property.
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