Can a Deceased's RRSP Loss Be Claimed Against Other Income on the Final Return in Canada?
This answer covers Canadian federal tax law, which applies in every province.
Sometimes. If an RRSP or RRIF falls in value between death and the final distribution, the legal representative can ask that the decrease be carried back and deducted on the deceased's final return, using Form RC249 and a reassessment. In the CRA's example, a plan worth $185,000 at death that paid out $150,000 produces a $35,000 deduction on line 23200.
The deduction is generally unavailable if the plan held a non-qualified investment after death, or if the final distribution is made after the end of the year following the year of death, although the CRA may waive that case by case. It is also unavailable when the amount was never included in the deceased's income, such as where the full amount was rolled to a spouse.
A claim made in the year of death needs a letter attached to the return, while a later claim needs a letter to the CRA. Increases work the other way: an increase in value after death is included in the income of the beneficiary or estate that receives it, for the year it is received.
Key takeaways
- A decrease in value after death can be carried back and deducted on the final return by asking for a reassessment with Form RC249.
- The deduction is generally unavailable if the plan held a non-qualified investment or the final distribution came after the end of the year following the year of death, though the CRA may waive the second case.
- No deduction is available when the amount was never included in the deceased's income, such as when it was fully rolled to a spouse.
- If the final distribution is in the year of death the deduction is claimed on line 23200 with a letter attached, and later claims need a letter to the CRA.