Income Tax Audit Manual

Compliance Programs Branch (CPB)


This chapter was last updated in March 2022.


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Chapter 16.0 Clearance certificates

Table of Contents

16.1.0 Clearance Certificate Program

16.1.1 Introduction

Subsection 159(2) of the Income Tax Act (ITA) requires that every legal representative,  other than a trustee in bankruptcy, obtain a clearance certificate certifying that all taxes have been paid or that acceptable security has been provided before distributing any property under their control.

Representatives effectively act for the deceased or other taxpayer in all matters relating to that person's tax matters. For the responsibilities definition of the legal representative, go to subsection 159(1) of the ITA. There are generally two types of representatives involved with a taxpayer's account: 

1. Authorized representative

An authorized representative is defined as a person or a business to which a taxpayer or a legal representative has given the Canada Revenue Agency (CRA) permission to deal with on the taxpayer's behalf.

2. Legal representative

Subsection 248(1) of the ITA defines a legal representative of a taxpayer as, “a trustee in bankruptcy, an assignee, a liquidator, a curator, a receiver of any kind, a trustee, an heir, an administrator, an executor, a liquidator of a succession, a committee, or any other like person, administering, winding up, controlling or otherwise dealing in a representative or fiduciary capacity with the property that belongs or belonged to, or that is or was held for the benefit of, the taxpayer or the taxpayer's estate.” Common types of legal representatives include: power of attorney, public trustee, executor, and administrator. Go to Appendix A-16.2.3, Glossary – Estate of deceased taxpayers, for more information on these types of legal representatives.

There are indicators in RAPID Option M.1.1 for each type of representative. The facts of each particular case will determine whether a person is a legal representative.

Taxpayer dies without a will (intestate) or without having named an executor or both

Generally, when a taxpayer dies without a will or without having named an executor or both, the CRA requires a letter of administration identifying a particular individual as the estate administrator.

Usually a court grants letters of administration to an individual or individuals to settle the estate of a deceased person who died without a will. If the administrator gives a copy of the court document appointing them, this is enough to confirm that they are the legal representative for concluding the estate. In any case, the RAPID Option M.1.1 should be updated before issuing the clearance certificate. The clearance certificate officers have the ability to update the Rapid Option M.1.1.

Family members of deceased individuals

Section 251(2) of the ITA defines persons related to each other as “individuals connected by blood relationship, marriage or common-law partnership or adoption.” For the purpose of this chapter, we will refer to these individuals as family members.

There are cases where a taxpayer has died intestate (without a will) and the estate is quite small. It would be too costly and could create financial hardship for a family member (surviving spouse, common-law partner, or parent) to get letters of administration. This type of circumstance must be looked at individually (based on its own merits) to determine whether the individual should be updated as the taxpayer’s representative. 

Individuals who want to act as a legal representative for concluding an estate where there is no will, should write to the Taxfiler Representative Identification System (TRIS) Section at their tax centre (TC). Do not give clearance if the legal representative is not updated in RAPID Option M.1.1. 

If you need help, refer the file to TRIS before issuing the clearance certificate. The following is a list of TRIS mailbox addresses:

Via encrypted email, forward Form TX19, Asking for a Clearance Certificate, and accompanying documents to TRIS Section – IBSD – Sudbury TC at Authorization Services-SUDTC / Services authorisation-CFSUD (CRA/ARC)

Authorization Services-WinnipegTC / Services autorisation-CFWinnipeg (CRA/ARC)  

Services d’autorisation - CF Jonquière / Authorization Services - Jonquière TC (CRA/ARC) 

TRIS T3-Ottawa TC / SIRC T3-CT Ottawa (CRA/ARC)

Purpose of the clearance certificate

Clearance certificates are most frequently issued on the distribution of property of a deceased individual, that person's estate, or a testamentary trust arising on the person's death. Clearance certificates are also required if a corporation surrenders its charter on the winding up of its affairs.

A clearance certificate can be issued only after all required income tax and goods and services tax / harmonized sales tax (GST/HST) returns have been filed and assessed and the income tax and/or GST/HST liability of the taxpayer is paid or secured.

Under subsection 159(3), representatives that fail to get a clearance certificate before distributing the property in question are liable for any unpaid taxes. The amounts include all income taxes and GST/HST (including provincial and territorial taxes that CRA administers), along with any interest and penalties. The certificate also covers the payment of any outstanding Canada Pension Plan contributions and employment insurance premiums, including any associated interest and penalties. The liability of the representative is limited to an amount not greater than the value of the property distributed.

The requirement to obtain a clearance certificate under subsection 159(2) does not apply to a trustee in bankruptcy. Issuing a clearance certificate to a trustee in bankruptcy would be misleading as the certificate would not cover any liability of the trustee under section 128.

It is important to note that issuing a clearance certificate does not prevent the minister from seeking to recover any unpaid tax from an estate or its beneficiaries, but relieves the legal representative from personal liability for such tax.

A clearance certificate covers only the property under the legal representative’s control up to the date the certificate is issued. Properties discovered later that affect the taxpayer’s reported income tax should be accounted for under a new clearance certificate.

Where is the clearance request processed?

Resident representatives

If the legal representative is a resident of Canada, Form TX19, Asking for a Clearance Certificate, will be sent to the regional tax services office (TSO) serving the area where the legal representative resides.

If there is more than one legal representative, they must all agree as to which representative will be responsible for the income tax affairs of the deceased and estate, including the request of a clearance certificate.

If the legal representative wants us to communicate with someone else, it is important to verify that there is proper authorization on file. If not, we should ask for a letter of authorization signed by the legal representative.

If the taxpayer's properties are located in an area served by a TSO other than the TSO serving the area where the legal representative resides, then the TSO processing the request may contact the other TSO (if warranted) to make sure that any additional information or lead is taken into account prior to issuance of the clearance certificate. Exceptionally, the legal representative, in conjunction with the authorized representative, may wish that the clearance certificate request be processed by the TSO serving the area where the deceased resided and the authorized representative is located, in which case, authorizations from all legal representatives to this effect are especially important.

Non-resident representatives

If the legal representative is a non-resident of Canada:

Excise Tax Act (Goods and Services / Harmonized Sales Tax)

Section 270, Part IX of the Excise Tax Act (goods and services tax / harmonized sales tax) includes similar provisions requiring a legal representative to obtain a clearance certificate by completing Form GST352, Application for Clearance Certificate, before distribution of any property or money under their control. 

Refer the file to the GST / HST Workload Development area for review to determine whether or not a clearance certificate should be issued to the registrant's representative. 

Types of clearance certificates

Basic types of clearance certificates may be issued:



Clearance certificates for deceased individuals, trusts, and corporations are issued on Form TX21, Clearance Certificate. Clearance certificates under the Excise Tax Act are issued on Form GST158.

If the representative is applying for a clearance certificate for distribution (final), there is no requirement to receive a date of death or partial certificate.

Requesting a clearance certificate

Information Circular IC82-6R12, Clearance Certificate, explains:

A payment or allocation of trust income to a beneficiary is not a distribution of property. As a result, a clearance certificate is not required.

Procedures for obtaining a clearance certificate are also in tax guides:

The regional TSO serving the area where the legal representative is located, will handle and process the request, even if the deceased taxpayer's file was handled by a different TSO. Clearance certificates are handled by a separate Estates and Trust group or by other designated officers in the TSO.

Final T1 General – Income Tax and Benefit Return for a deceased individual

A representative has a period of at least six months to file a deceased person's final T1 return. The due dates for the final T1 return are:

Due dates for final T1 return
Period when death occurred Due date for the final return
January 1 to October 31 April 30 of the following year  
November 1 to December 31
Six months after the date of death

If the deceased or the deceased's spouse or common-law partner earned business income during the year of death, special rules apply. For more information, go to Tax Guide T4011, Preparing Returns for Deceased Persons.

T3 Trust Income Tax and Information Return

Tax year

The tax year-end of an inter vivos trust is December 31, except for a mutual fund trust that elects to have a December 15 year-end. A mutual fund trust that previously elected to have a December 15 year-end can revoke the election. 

The tax year-end of a testamentary trust may be, but does not have to be, December 31. The first tax period of the trust begins on the day after the person dies, and ends at any time you select within the next 12 months. The tax rates used, and the tax year of the slips issued to the beneficiaries, is based on the year-end of the trust.


Commencing in 2015, testamentary trusts (other than graduated rate estates) will be required to use a calendar year tax year-end, and have their fiscal periods end in the calendar year in which the periods began. Those testamentary trusts which currently have a non-calendar year-end, will have a deemed tax year ending on December 31, 2015, unless the trust is an estate that exists at the end of 2015 and is a graduated rate estate for its 2016 tax year.

A graduated rate estate, of an individual at any time, is the estate that arose on and as a consequence of the individual’s death, if all of the following conditions are met:

• time is no more than 36 months after the death of the individual

• the estate is at that time, a testamentary trust

• the individual’s social insurance number is provided in the estate’s return of income for the tax year that includes that time and for each of its earlier tax years that ended after 2015 (36 month period after the death of the individual)

• the estate designates itself as the graduated rate estate of the individual in its return of income

• no other estate designates itself as the graduated rate estate of that individual in a return of income for a tax year that ends after 2015

An estate can only be a “graduated rate estate” for up to 36 months following the death of an individual. The estate will cease to be a graduated rate estate if it is still in existence at the end of the 36 month period.

Form T3RET, T3 Trust Income Tax and Information Return, may not be necessary if the estate is distributed immediately after the death of the person or if the estate did not earn any income before its distribution. If the filing of a T3 return is required, the due date will depend on the type of trust. For more information, go to Tax Guide T4013, T3 Trust Guide.


Income Tax Act

Information Circular

Tax Guides

Application form

Directory of Learning Products

16.1.2 Clearance certificate processing instructions 

Processing timeframes - service standards

In order to make sure that a taxpayer's legal or authorized representative obtains a clearance certificate from the CRA relating to specific authorized years of that individual's tax records, properly completed / submitted requests are to be entered into the Clearance Certificate System (CCS) database on a timely basis, and processed accurately.

CRA’s service standard is to address 80% of requests within 120 days of receipt by the CRA. The standard will be reviewed and reported on annually.

Reporting time and production

Activity type 628

Record the time spent on all activities related to the review of clearance certificate requests:

Production: do not record a unit of production for this activity.

Activity type 490

Record the time spent processing adjustments related to the clearance certificate requests: 

Processing Form TX19 requests for clearance certificates – 8 Steps

Receipt of requests 

Step 1

Determine which TSO should process the request by verifying the address of the legal representative. 

Confirm the TSO jurisdiction of the applicant by checking on the mainframe. If the legal representative has authorized another person or firm to act on their behalf with CRA, make sure this authorization has been updated on RAPID M.1.1. The legal or authorized representative may request a clearance certificate from the TSO that served the taxpayer. Where more than one legal representative is named or appointed, one legal representative (the applicant) may have assumed responsibility for communicating with CRA, which can be verified by contacting the applicant.

Step 2

In order to assist in approving low-risk clearance certificates, we have created a T1 Clearance Certificate Decision Tool (CCDT). This tool will assist in determining if a request should be accepted or denied.

Enter the SIN into Compliance Risk Profiling Viewer (CRPV):

Step 3

Review the completeness of the clearance request to make sure the application is complete and that it includes the persons asking for the certificate by providing the name, address, telephone number, and title (for example, executor, trustee, liquidator, and administrator).

For a deceased person, the request must include:

For a trust, the request must include:

For a corporation the request must include

For a GST/ HST registrant, the request must include:

Form TX19 received without complete documents

When you receive a Form TX19, Asking for a Clearance Certificate, request, you must only deny and return the request to the executors or representatives where the final return was not filed or assessed. Otherwise, the request should be accepted and entered in the Clearance Certificate System (CCS).

If there are missing documents, then you will send a letter to the executors or representatives requesting that they send the missing information and allow 30 days for submissions. If there is no response within 30 days, deny the request. You may also consider phoning the representative to request the missing documents and make a note in the CCS, instead of sending a letter.

Step 4

Enter the request into the CCS and initiate a query sheet. For more information, go to Clearance Certificate System (CCS) procedures.

NOTEPAD is to be updated that a request has been received and the applicable TSO. The “date the request is received” is the date received by CRA, regardless of which TSO or TC initially received the request. CCS will allow another date to be entered for when the request has been received by the processing TSO.

Step 5

If the legal and authorized representatives have been updated on RAPID M.1.1, proceed to obtain any necessary returns or permanent documents to facilitate review of the request (a copy of any relevant document should have been previously supplied and should be in Perm Docs).

If a copy of the will, appointment of a legal representative, or third-party authorization accompany the request, update the authorized representative on RAPID M.1.1. 

If the taxpayer dies without a will (intestate) or without having named an executor, or both, refer the file to TRIS, or inform the client to write to the TRIS Section at their TC. TRIS staff will review the case and update Option M.1.1 if appropriate. Do not send a clearance certificate until Option M.1.1 is updated.

If the necessary documents do not accompany the request and no legal or authorized representative has been updated on Option M.1.1, a copy of the will, grant of probate or administration, schedule of assets, and any third-party authorization must be requested from the applicant before proceeding. For more about this, refer to TSO letters, to be used by the Clearance Certificate Program.

The following are the most common documents necessary to process a clearance certificate request: 

1) Required returns

A clearance certificate will be issued only when all “required” income tax returns have been filed and assessed. Use the following chart to decide, according to the type of request being processed, the returns required and whether they are available for charge out. 

Required returns
Requests Verify that these returns are assessed Required returns (if necessary)
Date of death The T1 final return and all the returns * Note 1 The T1 final return, the prior year return, and the permanent document (PD) envelope
Inter vivos Trusts (final and partial) All T3 returns The T3 returns for last 3 years and PD
Corporations All T2 returns The PD envelope. Since T2s now E-file, CORTAX should be accessed for assessing information. Details of asset dispositions should be requested.

*Note 1: If returns are not assessed, consult with the resource or team leader. It may be possible to accept the request if the returns are not “required” under the ITA.

To verify the status of T1 reassessments, check:

New Records Storage Model

A New Records Storage Model (NRSM) has been adopted by the CRA in response to the need to store and retrieve the increasingly large volume of hard copy tax and operational documents both produced and received during the normal course of business. 

As a result of the move to the NRSM, combined with sustainable development and cost containment initiatives, it has been decided that it is no longer necessary to print and send documents produced during the course of an audit to the taxpayer’s permanent document (PD) folder. Furthermore, the outsourcing of records storage means that RAPID is no longer the method by which auditors may request taxpayer records from storage. Auditors who require access to tax and related records may begin the training and authorization process for ReQuest Web, the online charge-out system. 

For more information on the NRSM, including training on how to use the charge-out system and the instructions on getting authorization to access the system, go to Centre of Records Expertise.

2) Returns already charged out 

If the required returns are charged out to someone, contact that person to determine the reason for the charge-out and to inform them a request for a clearance certificate has been received. Based on the person's response, you must decide whether the review of the request can go ahead. If not, the request should be denied and any documents submitted should be stored in Recall.

3) Returns not filed

If one or more returns that are required (see the preceding Table) are not filed, refer the request to the resource or team leader to decide whether the request can proceed.

4) Outstanding amounts

For all clearance certificate requests, make sure all taxes, penalties, and interest have been paid or secured. 

Check the following systems to decide whether there are any outstanding balances or unapplied credits:

For more information on how to navigate within this system, go to ACSES. 

Keep codes

The “Keep code” holds back issuing a credit (refund) in order to apply it against an outstanding balance. The “Keep codes” and their meaning are shown below.

Keep code Meanings
0 Keep credit not required
This code is set automatically by the system when an account is nil or in debit status and the Keep code is not 4 or 6. If the “Keep code 0” comes from a “Keep code 4” which has just been deleted (visible in the T1 Case System), do not transfer the case to Collections. 
1 A credit balance exists
Transfer an ERA item as a Refund Enquiry (Category code 04) to the taxpayer’s TC. When the client is entitled to a credit, refer the file to the resource or team leader so that an ERA item can be created to release the credit or an audit set up to assess an offsetting debit. 
2 Withhold the credit for a reassessment The code is set when an offsetting debit is expected. Check Option Y for a pending reassessment. If there is no indication a return is being reassessed, refer to the resource or team leader so that an ERA item can be created to release the credit. 
3 Withhold the credit for an arrangement Collections set this code when they have made an arrangement with the client to pay off an existing debt. 
4 Withhold the credit for collection of a previously written-off debit
This code is set when a debit balance has been written off as uncollectible. 
5 Interception requested by the Collections Section
Collections will set this code when they expect a debt to be owing at some time in the future or the client has a debt owing on another account. 

Account status

TSO: If the T1 Case System shows the status is TSO, refer the request to the responsible TSO Revenue Collections.

Call center: If the T1 Case System shows the status is Call Centre, refer the request to the Debt Management Call Centre (DMCC).

In the case of a “Set Off” flag on the account, any tax refund may be used to pay debts owed by the taxpayer under federal, provincial, or territorial programs. In the case of a Stall Code on the account, all collection action stops until the outstanding query is resolved.

When there is a Set Off Flag, a Keep Code, or a Stall Code on the account, verify with your resource or team leader the appropriate actions to take.

Debit balance

If there is a balance owing over $0 in any revenue account, and the collection limitation period (CLP) for the balance owing has not expired, the clearance certificate cannot be issued. 

If there is a balance owing in any revenue account, and the CLP for those amounts has expired, no more actions can be started to collect the debt. As a result, the clearance certificate can be issued. 

A letter requesting payment of the balance owing, where the CLP has not expired, must be sent to the representative. Allow 30 days for receipt of the payment.

Where the balance owing remains unpaid after 30 days, the request for clearance certificate must be denied. 

If you phone the representative, you can direct them to the CRA’s Automated Collection Service at 1-888-863-8657 to make arrangements to pay the balance owing. If they have any other questions, you can also direct them to the Individual tax enquiries line at 1-800-959-8281.

Credit balance

If the reason for a credit balance in any account cannot be readily determined and resolved, deny the clearance certificate request and send a letter to the representative informing them to contact the Individual income tax enquiries line at 1-800-959-8281 if they have any questions relating to the credit.

The inventory of incomplete files must be checked on a regular basis to make sure that requests for more information do not stay unanswered. If the information is not received after the bring forward (BF) period, the request should be denied and referred to the resource person or team leader. 

When the legal representative decides to abandon a request, the file must still go through “Initial review” to decide whether audit actions are required. 

Step 6

Complete requests

Where all the documents shown on the checklist are submitted or if the screener believes that more information is not required, the request should be updated in CCS as ready for review and the file referred accordingly.

Taxpayer contact

It will be more expeditious to phone the legal or authorized representative. If a telephone call is not successful, a letter must be sent. Standard form letters that simplify the letter creation process and help to save time have been created. Refer to the TSO letters. If you must write to the representative:

If a reply is not received at the expiration of the 40-day period the request will be denied.

Charge out of returns

Only charge out returns when it is not possible to properly assess the tax at-risk based on the information available on-line. 

Update the "Comments" area of CCS to document the action taken. The request and the accompanying documents should be placed in a folder and kept, while waiting for the returns to arrive, according to the filing system in use in the office.

Upon receipt of the returns, match them with the file, and send for review.

Review the NRSM information included in Business Audit News - Issue 5 - April 2014.

Step 7

Initial review

During the review of a request for a clearance certificate, make sure that all required returns have been assessed and the taxes paid or secured. Only issue the clearance certificate when no further returns and no examination will be required. Therefore, it is important to examine all available information to decide their possible tax consequences.

The next step is to review the documents submitted with the request and the tax information available to decide whether an adjustment to the returns is required or whether a clearance certificate can be issued. To assist you in conducting the review, use the T1 and T3 checklists and query sheets. Pay particular attention to the following items:

The instructions above are not exhaustive. Refer to the T1 deceased Audit Plan for an extensive list of possible audit issues.

Clearance certificate (CC) teams should not see a complicated technical issue as a reason to automatically refer the CC request to another area. Referring CC requests to other areas adds additional days to the processing days and this should be avoided except in exceptional circumstances.

The SP6 and team leader are initial resources to resolve technical issues. When the technical issue cannot be resolved within the team, the CC teams may send the question to the HQ email box. If the issue is T3 related, the CC teams may also consult the T3 National Trust Team (NTT) in the KW TSO. However, the CC teams should not automatically refer the T3 file to the NTT; the initial contact should be on a consultation basis only.

Referrals of CC Requests

There are situations when referrals to other areas may be necessary, but such referrals must only occur in the context of obtaining a specific service, and only after the CC officer has taken all steps to resolve the issue. This includes an information consultation with the area to which the request may be referred. When a referral occurs, the CC officer cannot cancel the CC request and should inform the legal representative that a referral has occurred and provide an estimate of the time the referral will take.

For example, the CC officer may note a possible undervaluation of an asset on its deemed disposition upon the death of the taxpayer. The CC officer should attempt to resolve the issue by obtaining information from the legal representative, including obtaining a copy of the private valuation report if one was prepared. The possible undervaluation must also be material and what constitutes an appropriate level of materiality should be discussed with the SP6 or team leader. After these steps, the CC officer can informally consult the Valuations Section. If Valuations agrees that the file can be referred, then the CC officer may make the referral and should inform the requestor that this has occurred. The CC team is responsible to monitor the status of these referrals.

Referrals to the Kitchener-Waterloo NTT

There is a change in policy on referring CC requests with specific T3 issues to the NTT. CC teams must now attempt to resolve T3 issues, as is done with T1 and T2 issues. In many situations, the T3 CC request is part of a T1 CC request. The CC officer is the person best placed to review the issue and obtain information from the legal representative. In some situations, a reassessment of the T3 return may be required and the CC officer may complete these reassessments the same as for T1s and T2s.

The CC teams will be supported by the reinstatement of the SP6 for technical issues, access to the NTT through the email box, and access to the HQ Technical Applications Section. It is also expected that the regions will ensure training is provided to the CC teams through learning product TD1160, Estates and Trusts – Audit of a Deceased Person’s Returns. It may be appropriate also that an informal training session be provided by the NTT.

It is understood that there will be material trust audit issues that are too complicated for the CC team, even after attempting to resolve as noted above. When it is a T3 issue, the NTT will likely agree that an audit is warranted and the CC team will refer the requests to the NTT. When the complicated issue relates to a T2 or T1, the CC team may refer to one of the Complex Transaction (CT) audit teams for review.

However, the CC request must stay active and cannot be cancelled. The CC officer should tell the legal representative that the request has been referred and provide an estimate of the time in referral status. The CC team remains responsible for the CC request and its approval once the NTT or the CT completes its audit. Accordingly, the CC team will have to periodically monitor referrals and update the legal representative on its status.

Statue-barred returns

If the request is in respect to a statute-barred period, refer the file to the regional BI and they will decide if there is any risk associated with the file. If so, BI will open the file for an audit, if not, then you can process the clearance. 

You will not deny the request for clearance certificate simply because the file is statute barred.

As a result of the review, the BI officer may conclude that there is no compliance issue and recommend the clearance certificate be processed. In this case, proceed with the issuance of the certificate.

Fee paid to Executor

If a family member or friend acts as an executor, who does not regularly give these services, then they are considered to earn income from an "office" and the amount is taxable in the same fashion as a salary. The fees are subject to tax and Canada Pension Plan (CPP) withholdings. A payroll account will need to be opened by the executor and failure to comply may result in an unexpected personal tax bill for the executor. Executor fees are not subject to employment insurance premiums.

Make sure the executor reports the CPP withholdings and the tax on the executor’s fee before sending the clearance certificate.

Step 8

Approval and Issuance

At this stage, the audit work is completed and any balance owing paid. The request and all the documents pertaining to the file are returned so the clearance certificate can be issued. Take the following actions to finalize the file:

If there is an outstanding issue with the T3, e-mail mailbox: NOR-Ottawa, ERP-Gladwin. 

You are no longer able to update an account with an unknown date of death. There should be very few situations where you would update an individual with a date of death unknown. Make every attempt to get the correct date of death from estate.

In cases, where an unknown date of death update is required, email the request to Individual Identification-HQ / Identification des Particuliers-AC (CRA/ARC) for their review.

Note: do not update any survivors account with a clearance certificate number.

1. Form TX21 – as there is no separate check box for Form TX19 and the correspondence received by taxpayer, attach Form TX19, the checklist, list of assets, any other important documents sent by the taxpayer.

2. Legal documents – check the proper box on RC467 Trailing Documents Records Transmittal Slip.

16.1.3 Clearance certificates – Corporations with leave to surrender charter

A corporation may wind up its affairs and distribute its assets as a winding-up dividend to its shareholders. The representative will submit a request to surrender the corporation’s charter and have the company struck from the federal or provincial corporate register.

A corporation is considered to have been wound up if:

Generally, applicable federal or provincial statutes authorize the dissolution of a corporation only if it can be shown that:

Subsection 88(1) of the ITA provides rules that apply if a subsidiary has been wound up into its parent corporation provided that both corporations are taxable Canadian corporations and the parent owns not less than 90% of the issued shares of each class of the subsidiary’s capital stock. The provisions in subsection 88(2) apply to a winding up of a Canadian corporation to which subsection 88(1) does not apply.

Corporations that are dissolved under the provisions of their incorporating statute or wound up by law, will surrender their charter according to either the Canada Business Corporations Act or the applicable provincial corporations’ legislation. The date of issue of the dissolution certificate is significant to the CRA, as that is when the corporation is deemed to have disposed of all of its assets.

An involuntary dissolution can occur when a corporation fails to fulfill the requirements of the incorporating jurisdiction, such as the payment of certain fees or filing periodic reports. Depending on the statutes of the incorporating jurisdiction, it may be possible to restore the dissolved corporation. The procedures vary and may include the submission of an application and the payment of a fee. Usually, the corporation continues to operate.

Under the corporation acts, there may be a significant period of time between the struck off date and the dissolution date, during which the corporation actively seeks or is forced to seek a formal dissolution.

Time limits

The CRA can reassess a dissolved corporation or one that has been struck permanently from the corporate registry, subject to the provisions of the applicable corporate statute. The corporation does not have to be revived in the following jurisdictions that allow a civil, criminal, or administrative action to be initiated within a specified time period following the date of dissolution:

Jurisdictions, Provisions, and Time limits
Incorporating Jurisdiction Corporate Act Provision Time Limit
Canada 226(2) 2 years
Ontario 242(1) 5 years
Newfoundland 355(2) 2 years
New Brunswick 152(2) 2 years
Manitoba 219(2) 2 years
Saskatchewan 219(2) 2 years
Alberta 219(2) 2 years
Yukon 228(2) 2 years

In all other jurisdictions, the corporation has to be revived before a notice of assessment or reassessment can be issued; there are no time limits or windows of opportunity. Revivals are usually methods of last resort to assess a corporation.

If a clearance certificate has not been obtained under subsection 159(2), it is possible to assess the representative who is responsible for the affairs of the corporation. 

After property of a corporation is distributed to the shareholders, they are liable for taxes, interest, and penalties, but only to the amount of the distribution made to them and subject to the time limits for actions that can be taken against the shareholders. This action must be brought in the province where the corporation had its registered office immediately before dissolution.

Prior to bringing any action, the CRA must obtain the financial statements, minute books, shareholder register, books of account, and other records to ascertain the information relevant to each shareholder’s distribution. The onus is on the CRA to prove the extent of the shareholder’s liability and to determine the applicable section of the provincial corporations act.

Audit procedures for charter-surrendered corporations

If an audit is required on a corporation requesting a clearance certificate, it will be sent to the TSO to be completed. The TSO auditor assigned the file should complete these audit procedures when reviewing the account of a dissolved corporation:

Certificate of revival

A certificate of revival may be required to assess a dissolved corporation. If a corporation has distributed its assets, the corporation must be revived before an assessment can be made. In either case, it may be in the best interests of the shareholders to ensure that the certificate is filed.

A revival deems the company to exist from the time of its incorporation so the assessment is valid under subsection 152(1). Assessments are addressed to the dissolved corporation, in care of the representative who is responsible for the affairs of the corporation. The representative is assessed under subsection 159(3), but the representative’s liability for payment is limited to the value of the property distributed.

Instructions on how to restore a dissolved corporation are available from the local corporate registry office or the regional office of the Department of Justice.

The actions required depend on the circumstances of the case and may include:

When the corporation is revived, assessments will be made as a consequence of filing the final returns. For example:

Professional judgement should be exercised and materiality considered when determining whether to pursue any adjustments for the year in which the corporation surrendered its charter. If no adjustments are made, the corporation should be coded Inactive and the unassessed returns are to be stored in Recall.


Income Tax Act

Interpretation Bulletins

Other references

Appendix 16.1.0 Letters

A-16.1.1 Confirmation of Request for Clearance Certificate


Month DD, YYYY (Insert date)

Mailing Address


Dear Mr./Ms./Mrs./Miss/Dr. (Insert last name):

Subject: Request for clearance certificate


We received your request for a clearance certificate on (insert date), but cannot process it because a clearance certificate cannot be issued until the required income tax returns are filed and assessed. 

Please resend your request to us after you receive the notices of assessment for all the returns filed. To help us process your request quickly, please include the notice of assessment numbers and dates issued, as well as:

We will process your request as soon as we receive the information.

To learn more, see Information Circular IC82-6R11, Clearance Certificate, at 

To help you understand your rights with the Canada Revenue Agency (CRA), please read the Taxpayer Bill of Rights at The Bill is a set of 16 rights confirming that the CRA will serve taxpayers with a high degree of accuracy, professionalism, courtesy, and fairness. 

You can also get these publications by calling us at 1 800-959-8281 for individual income tax enquiries or at 1 800-959-5525 for business and self-employed individual enquiries.

If you have questions, please call me at xxx-xxx-xxxx. You may also reach my team leader, (insert name), at xxx-xxx-xxxx.




Auditor Name 

Audit Division

Tax Services Office:  




A-16.1.2 Confirmation of Clearance Certificate Issued

Appendix removed

Appendix 16.2.0 Forms, templates, checklists, etc.

A-16.2.1 Forms of wills

There are three forms of wills under which a person can dispose of property on death:

  1. A will under common law must be written or typed and signed by the testator before two witnesses, who must sign in the presence of each other and the testator. The witnesses cannot be the beneficiary or the spouse of a beneficiary.
  2. A notarial or authentic will must be witnessed by two notaries or one notary and two witnesses, all in the presence of each other. This type of will is found in Quebec and is based on Civil Code.
  3. A holograph will must be written in the handwriting of the testator and signed and dated by the testator. No witnesses are required. This is legal in Alberta, Manitoba, New Brunswick, Ontario, Quebec, and Saskatchewan.

A-16.2.2 Contents of a will

Contents of a will
Identification Gives the testator’s name, occupation, and domicile
Revocation Revokes all previous wills  
Notation of executor/trustee
Names the executor or trustee
Power of appointment to trustee Gives the trustee powers to deal with the assets, such as the power to sell, administer, or distribute the estate  
Power to pay debts
Enables the trustee to pay legal debts  
Specific power of sale
Enables the trustee to sell a specific asset at a certain price within a certain time  
General or specific legacies
Directs assets to named individuals  
Distribution of residue
Distributes the estate remaining after payment of debts and distribution of legacies
Transfers to minors Allows payments to persons under legal age, with receipt by the parent or guardian being sufficient to discharge the trustee’s responsibility  
Power of appointment to trustee Allows the trustee to invest estate funds without being restricted to investments authorized by the Trustee Act  
Power to borrow
Allows the trustee to borrow money and exonerates the trustee from loss, providing the borrowing was done in good faith
Signature of testator and witnesses
Includes the signature of the aforementioned and the date they signed

The executor may take the will before a proper officer or court to obtain legal assurance that the will is the last will and testament of the deceased person. The establishment of the validity of the will is called probate. Not all provinces require that the will be probated. Refer to provincial legislation to establish if probate is necessary. A list of estate assets and liabilities is included when wills are probated.

A-16.2.3 Glossary – Estate of deceased taxpayers

These are terms the auditor may encounter during audits of estates: 

Glossary – Estate of deceased taxpayers
Term Meaning  
A person who is legally appointed to represent a deceased person because the person died without a will, without naming an executor or alternate executor in the will, or because there may be a dispute between the named executor and the beneficiaries. If the deceased had no will (intestate), the provincial laws of succession will generally be followed in appointing an administrator.  
Codicil The means by which a will can be amended without the execution of a new will. It must be executed with the formalities of a will.  
Contingent interest A future interest in real or personal property that is dependent upon the fulfilment of a stated condition.
Corpus The principal or capital of an estate, as distinguished from income.  
Dependant’s relief The establishment of property rights under family property legislation for the benefit of a spouse or children.  
Demonstrative gift A gift by will of a sum of money to be paid from designated funds or assets, such as a gift of $2,000 paid from a specific bank account.
Disclaimer An outright refusal of a gift, share, or interest in a will.  
Distribution To divide the estate property among the beneficiaries according to the terms of the trust document, or according to the applicable law.  
Encroachment The power given to the executor to use capital funds for the purpose described in the will.  
Exclusive spousal or common-law partner trust

A trust created by the deceased under which:

  • The spouse or common-law partner receives all of the income of the trust arising before the spouse or common-law partner’s death; and
  • no person, except the spouse or common-law partner, may, before the spouse or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust.

See subsection 70(6) of the ITA.

Executor A person named by the deceased to carry out the provisions of the deceased's will. NOTE that in the province of Quebec an executor may also be known as a liquidator.  
General legacy
A specific bequest for non-specific property, such as “$500 to my son Bob.”  
Indefeasible Not capable of being annulled or rendered void.  
Issue All persons who have descended from a common ancestor.  
Joint tenancy A holding of a property by two or more persons in such a manner that, on the death of one of the joint owners, the survivors take the entire property.  
Lapse A falling of a gift into the residual of the estate by reason of the death of the legatee or devisee during the lifetime of the testator.
Letter of administration A certificate of appointment or authority to settle an estate, issued to an administrator by the appointing court.  
Letter testamentary A certificate of appointment, issued to the executor by the court in the probate process.  
Legacy A gift of personal property by will (same as a bequest).  
Life tenant
One who owns an estate or real property for their own life or the life of another person.  
Power of Attorney
An instrument appointing a person to act as the agent or attorney of the person granting it. The power of attorney may be general or limited to specific duties or functions, and it may be applicable immediately or at some future date or upon some future occurrence. When an individual dies, as with all other authorizations, the power of attorney ceases.  
Probate Formal proof before the court that the instrument offered is the last will and testament of the deceased.  
Public Trustee
A provincial office which may be appointed to administer an individual's financial and legal affairs because of the individual's incapacity to do so. The Public Trustee usually becomes involved when a person is declared incompetent and there are no family members or friends to take charge of their affairs. The Public Trustee also administers the affairs of minors. NOTE that provincial Public Trustee legislation provides the Public Trustee's appointment ceases on the taxpayer's death.  
Release or surrender
A discharge of a right of action against another person. It must be made under seal or by consideration.  
Renunciation The refusal of a beneficiary to accept their interest in an estate or the refusal of an individual named to a fiduciary capacity to accept the appointment.  
Succession The act or the fact of a person becoming entitled to the property of a deceased person.  
Specific devise A gift by will of a specific parcel of real property.
Specific legacy A gift by will of a specific article of personal property.  
Tenants in common Holding of property by two or more persons who each have an undivided interest in the property. Upon death, the interest passes to the heirs or devises and not to the survivors.
Testamentary capacity Mental capacity to make a will.
Testamentary debts Debts of the deceased that were outstanding immediately before death and any amount payable by the estate as a consequence of death.  
Testator (testatrix)
The deceased person who made and left a valid will.  
Variation of the will
A rearrangement of the terms of the will after the death of the taxpayer by consent of the beneficiaries with respect to their interests.
Vested interest An immediate fixed interest in property, although the right of possession and enjoyment may be postponed.   
Will A legally enforceable document that declares the intentions about disposition and administration of the testator’s estate after death. It is effective only at death and can be revoked at any time prior to death.  

A-16.2.4 Additional legislative authority – ITA

Additional legislative authority – ITA
ITA Reference Subject Matter References Interpretation Bulletin (IT) Information Circular (IC)
34.1(8), (9) Alternative year-end methods
40(2) Choice of property to claim as principal residence

Income Tax Folio S1-F3-C2, Principal Residence

Form T2091IND-WS, Principal Residence Worksheet

Form T2091IND, Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust)

56(1)(a) (iii) Death benefit IT508R, Death Benefits
70(1) Computing income

IT210R2, Income of Deceased Persons – Periodic Payments and Investment Tax Credit

Tax Guide RC4111, Canada Revenue Agency – What to Do Following a Death

70(2) Amounts receivable for rights or things (elections)

IT212R3, Income of Deceased Persons – Rights or Things

IT234, Income of Deceased Persons – Farm Crops

IT278R2, Death of a Partner or of a Retired Partner

IT326R3, Returns of Deceased Persons as “Another Person”

IT427R, Livestock of Farmers

70(3), (3.1), 69(1.1) Rights or things transferred to beneficiaries IT427R, Livestock of Farmers
70(4) Revocation of election in 70(2) IT212R3, Income of Deceased Persons – Rights or Things
70(5), (5.1), (5.2), (5.3), (5.4) Capital property of a deceased taxpayer: Depreciable and other property

IT140R3, Buy-sell agreements

IT416R3, Valuation of shares of a corporation receiving life insurance proceeds on death of a shareholder

IT313R2, Eligible Capital Property – Rules Where a Taxpayer Has Ceased Carrying on a Business or Has Died

IT125R4, Dispositions of Resource Properties

IC89-3, Policy Statement on Business Equity Valuations

T2SCH6, Schedule 6, Summary of Dispositions of Capital Property

70(6), (6.1), (6.2)
Transfers or distribution to spouse or common-law partner or spousal or common-law partner trust: Exception to subsection 70(5)

IT305R4, Testamentary Spouse Trusts

IC07-1R1, Taxpayer Relief Provisions

70(7) Special rules for spouse or common-law partner /spousal or common-law partner trusts
IT305R4, Testamentary Spouse Trusts
70(8), (10) Meaning of certain expressions and definitions

IT305R4, Testamentary Spouse Trusts

IT349R3, Intergenerational Transfers of Farm Property on Death

70(9), (9.1), (9.2), (9.3), (9.6), (9.8) Tax deferred rollovers on intergenerational transfers of certain farm property

IT349R3, Intergenerational Transfers of Farm Property on Death

IC07-1R1, Taxpayer Relief Provisions

70(13) Capital cost of certain depreciable property IT349R3, Intergenerational Transfers of Farm Property on Death
70(14) Order of disposal of depreciable property IT349R3, Intergenerational Transfers of Farm Property on Death
72(1) Reserves in the year of death

IT152R3, Special reserves – Sale of land

IT154R, Special reserves

72(2) Elections by representative for reserves

IT152R3, Special reserves – Sale of land

Form T2069, Election in Respect of Amounts Not Deductible as Reserves for the Year of Death

80(2)(a), (p), (q)
Debt forgiveness rules  
104 to 107 These sections apply to the estate and the representative as if the estate was a trust where a trust arrangement is in effect  
Definition of testamentary trust
111(2) Year of death: Net capital losses IT232R3, Losses – Their Deductibility in the Loss Year or in Other Years
118.1(4), (5), (6), (7), (7.1), (8)
Gifts of property

IT226R, Gift to a charity of a residual interest in real property or an equitable interest in a trust

IT288R2, Gifts of Capital Properties to a Charity and Others

IT407R4-CONSOLID, Dispositions of Cultural Property to Designated Canadian Institutions

118.2(1), (2) Medical expenses

Income Tax Folio S1-F1-C1, Medical Expense Tax Credit

Income Tax Folio S1-F1-C2, Disability Tax Credit

Income Tax Folio S1-F1-C3, Disability Supports Deduction

Tax Guide RC4064, Disability-Related Information

122.5(1), (2) GST credit for T1s Definitions and exceptions
122.62(5) Death of cohabiting spouse or common-law partner and the child tax credit Form RC65, Marital Status Change
Filing for deceased individuals
Tax Guide T4011, Preparing Returns for Deceased Persons
Death of a partner or proprietor

IT278R2, Death of a Partner or of a Retired Partner

IT326R3, Returns of Deceased Persons as “Another Person”

159(2) Certificate before distribution

IC82-6R12, Clearance Certificate

Form TX19, Asking for a Clearance Certificate

159(3) Personal liability of the legal representative IC98-1R7, Tax Collections Policies
159(5) Elections for certain provisions under subsections 70(2), (5), (5.2), and (9.4)

IT212R3, Income of Deceased Persons – Rights or Things

IT278R2, Death of a Partner or of a Retired Partner

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

164(6), (6.1)
Application of losses realized upon death to the TD1 of prior years

Regulation 1000, Election by a legal representative for property dispositions

IC07-1R1, Taxpayer Relief Provisions

Estate or trust income

IT465R, Non-Resident Beneficiaries of Trusts

IC77-16R4, Non-Resident Income Tax

230, 230.1
Books and records retention IC78-10R5, Books and Records Retention/Destruction
Definition of disposition
248(1) Definition of taxable Canadian property IT420R3, Non-Residents – Income Earned in Canada
248(8) Occurrences as a consequence of death  
248(9) Definition of disclaimer and release or surrender

IT305R4, Testamentary Spouse Trusts

IT313R2, Eligible Capital Property – Rules Where a Taxpayer Has Ceased Carrying on a Business or Has Died

IT349R3, Intergenerational Transfers of Farm Property on Death

248(9.1) How a trust is created IT305R4, Testamentary Spouse Trusts
248(9.2) Vesting indefeasibly  
Regulation 204 Filing returns for estates and trusts
IT531, Eligible Funeral Arrangements
Regulation 206
Legal representatives and others regarding filing of returns
Regulation 1001 Annual installments for the deceased taxpayer

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