ARCHIVED - Income of Deceased Persons -- Periodic Payments and Investment Tax Credit

From: Canada Revenue Agency

What the "Archived Content" notice means for interpretation bulletins

NO: IT-210R2

DATE: November 22, 1996

Income of Deceased Persons -- Periodic Payments and Investment Tax Credit

REFERENCE: Subsection 70(1) (also subsections 70(2) and (3); and paragraphs 12(1)(t) and 148(2)(b) of the Income Tax Act)


This bulletin cancels and replaces Interpretation Bulletin IT-210R, Income of Deceased Persons -- Periodic Payments, dated November 5, 1982.


The purpose of subsection 70(1) is to require certain amounts to be included in computing the income of a taxpayer for the year of death.

This bulletin discusses the tax treatment of certain amounts payable periodically that had accrued but were not received at the time of death. It also explains the tax treatment of any related accrued expenses. As well, the bulletin outlines the tax consequences when an amount of investment tax credit is claimed for the year of death or a previous year.

Discussion and Interpretation


¶ 1. Under paragraph 70(1)(a), an amount payable on a periodic basis that was not paid to a taxpayer before the taxpayer's death is deemed to have accrued in equal daily amounts in the period for which the amount was payable. The value of the portion that is deemed to have accrued to the date of death is required to be included in computing the taxpayer's income for the year of death. Paragraph 70(1)(a) applies to amounts of interest, rents, royalties, annuities (other than an interest in an annuity contract to which paragraph 148(2)(b) applies), remuneration from an office or employment, and other amounts payable periodically. This provision does not apply to amounts which had become payable before death.

Accrued interest

¶ 2. If a deceased taxpayer owned a term deposit or other similar investment on which interest was payable periodically, interest accrued from the last date on which interest was payable up to the date of death would be included in income for the year of death under paragraph 70(1)(a). However, if the taxpayer also had on hand a matured investment (such as a matured Treasury Bill or uncashed matured bond interest coupons) at the date of death, any interest that was owing to the deceased taxpayer on the matured investment immediately before the date of death would be considered a right or thing for the purposes of subsection 70(2) to the extent the amount was not included or required to be included in the deceased's income for the year or a preceding year. For information about the tax treatment of "rights or things," refer to the current version of IT-212, Income of Deceased Persons -- Rights or Things.

Accrued salary or wages

¶ 3. Only the amount of salary or wages accrued from the beginning of the pay period in which an employee dies to the date of death is included in the employee's income under paragraph 70(1)(a). When the amount due and unpaid is in respect of a prior pay period, such amount would be included in income under subsection 70(2). If, prior to the death of an employee, the employer is committed (say because of union bargaining) to pay retroactive salary or wage adjustments, but these are unpaid at the date of the employee's death, the amount due to the employee is included in income under subsection 70(2).

Genuine doubt about the nature of income

¶ 4. Where there is genuine doubt about whether the nature of income earned before a taxpayer's death is a periodic payment or a right or thing, its treatment is generally resolved in favour of the taxpayer. As a result, the legal representative may report the income in question under paragraph 70(1)(a) or under subsection 70(2). In the latter case, depending upon the timing, an election under that provision may be made, or if the income has been transferred to beneficiaries, subsection 70(3) applies instead of subsection 70(2).

Deduction of related accrued expenses

¶ 5. Any accrued expenses related to the amount included in income under paragraph 70(1)(a) may be deducted provided that the expenses would have been deductible if paid (e.g., interest expense and property taxes). When such expenses exceed the gross amount included in income, the excess is deductible from other income of the taxpayer.

Reporting requirements

¶ 6. Amounts included in income under paragraph 70(1)(a) and any related accrued expenses that are deductible are reported in the taxpayer's "ordinary" income tax return for the year of death.

Investment tax credit

¶ 7. When an amount of investment tax credit has been deducted from a taxpayer's tax payable for the year of death or a previous year, the rule in paragraph 12(1)(t), as modified by paragraph 70(1)(b), applies. The amount is required to be included in the taxpayer's income for the year of death to the extent that the amount was not included in income under paragraph 12(1)(t) for a previous year or is not used to reduce the tax basis of the related expenditure (i.e., the undepreciated capital cost of depreciable property, the adjusted cost base of certain interests in a partnership or a trust, the amount of deductible scientific research expenditures, or the amount of qualified Canadian exploration expenditures).

Explanation of Changes


The purpose of the Explanation of Changes is to give the reasons for the revisions to an interpretation bulletin. It outlines revisions that we have made as a result of changes to the law, as well as changes reflecting new or revised departmental interpretations.

Reasons for the Revision

We have revised bulletin IT-210R to clarify our position with respect to the deduction of accrued expenses and to reflect amendments to subsection 70(1) by S.C. 1980-81-82-83, c. 140 (formerly Bill C-139) and by S.C. 1988, c. 55 (formerly Bill C-139). The comments in the bulletin are not affected by any draft legislation released before July 29, 1996.

Legislative and Other Changes

¶s 1, 2 and 3 replace former ¶ 1. These paragraphs reflect the amendment to renumber the rule regarding periodic payments in subsection 70(1) as paragraph 70(1)(a) and to add new paragraph 70(1)(b) which is discussed in new ¶ 7. This amendment to subsection 70(1) took effect in 1988. ¶ 1 also reflects an amendment which clarifies that the reference to an annuity in subsection 70(1) (as it read before 1988) does not include an interest in those annuity contracts to which paragraph 148(2)(b) applies. This latter amendment took effect after November 12, 1981.

¶ 5 (former ¶s 3 and 4) is revised so that it only comments on the deduction of related accrued expenses. The deductibility of such expenses are determined under the relevant provision of the Act and the amounts claimed are reported in the appropriate places on the taxpayer's income tax return.

New ¶ 7 reflects the enactment of paragraph 70(1)(b) as a consequence of amendments to paragraph 12(1)(t) and other provisions of the Act relating to the investment tax credit.

Throughout the bulletin, we have changed some of the wording to improve readability.

Notice -- Bulletins do not have the force of law

Interpretation bulletins (ITs) provide Revenue Canada's technical interpretations of income tax law. Due to their technical nature, ITs are used primarily by departmental staff, tax specialists, and other individuals who have an interest in tax matters. For those readers who prefer a less technical explanation of the law, the Department offers other publications, such as tax guides and pamphlets.

While the ITs do not have the force of law, they can generally be relied upon as reflecting the Department's interpretation of the law to be applied on a consistent basis by departmental staff. In cases where an IT has not yet been revised to reflect legislative changes, readers should refer to the amended legislation and its effective date. Similarly, court decisions subsequent to the date of the IT should be considered when determining the relevancy of the comments in the IT.

An interpretation described in an IT applies as of the date the IT is published, unless otherwise specified. When there is a change in a previous interpretation and the change is beneficial to taxpayers, it is usually effective for all future assessments and reassessments. If the change is not favourable to taxpayers, it will normally be effective for the current and subsequent taxation years or for transactions entered into after the date of the IT.

A change in a departmental interpretation may also be announced in the Income Tax Technical News.

If you have any comments regarding matters discussed in this IT, please send them to:

Director, Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
Revenue Canada
Ottawa ON K1A 0L5

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