In order to protect the Canada Revenue Agency’s (CRA) ability to collect income taxes owing, the Income Tax Act contains a provision that requires an estate’s executor/ executrix or administrator to apply for a clearance certificate from the CRA before distributing assets from the estate.
Failure to obtain a clearance certificate leaves the executor personally liable for any outstanding income tax liability that the CRA cannot collect from the estate that otherwise would have been available. A clearance certificate certifies that all amounts for which the estate is liable under the Income Tax Act have been paid or adequate security has been posted.
In determining the amount of the liability, the executor is responsible for the actual income tax liability as calculated plus the liability that could reasonably be expected. The liability would include the actual income taxes owing, plus any interest and penalties that may apply.
An estate representative requests a clearance certificate by filing CRA form TX19, Asking for A Clearance Certificate. The form requires an extensive amount of information including, for example:
The application requires each asset’s fair market value and adjusted cost base as of the date of distribution from the estate;
(Reprinted from Comment, Edition 308, with permission from The Institute, 390 Queens Quay West, Suite 209, Toronto, Ontario)
Failure to obtain a clearance certificate leaves the executor personally liable for any outstanding income tax liability that the CRA cannot collect from the estate that otherwise would have been available. A clearance certificate certifies that all amounts for which the estate is liable under the Income Tax Act have been paid or adequate security has been posted.
In determining the amount of the liability, the executor is responsible for the actual income tax liability as calculated plus the liability that could reasonably be expected. The liability would include the actual income taxes owing, plus any interest and penalties that may apply.
An estate representative requests a clearance certificate by filing CRA form TX19, Asking for A Clearance Certificate. The form requires an extensive amount of information including, for example:
- Details about the deceased’s identity – full legal name, social insurance number, date of death and last address of the deceased;
• Documents to support estate distribution instructions – complete and signed copy of the taxpayer’s will, including any codicils, renunciations, disclaimers, and all probate documents, if applicable;
• The document appointing an administrator if the taxpayer died intestate (without am will);
• Documents to substantiate who has authority as the estate’s legal representative;
• Details of all assets that were owned by themdeceased at the date of death – lists of personally by the deceased as well as assets held jointly, registered retirement savings plans and registered retirement income funds.
The application requires each asset’s fair market value and adjusted cost base as of the date of distribution from the estate;
- • Details about distributions made and proposed from the estate;
• Details about all beneficiaries receiving property other than cash – names, addresses, and social insurance numbers; and,
• Authorization if the CRA is to communicate with someone other than the estate’s legal representatives – include completed Form T1013, Authorizing or Cancelling a Representative.
(Reprinted from Comment, Edition 308, with permission from The Institute, 390 Queens Quay West, Suite 209, Toronto, Ontario)