Question

marley, who was married, passed away suddenly on may 15 of the current year. marley had contributed a total of $150,000 over the years to her registered retirement savings plan (rrsp) that was valued at $200,000 at the time of her death. marley also owned a home worth $500,000 ($350,000 purchase cost). marley's income sources in the year of death included rrsp withdrawals of $20,000 and a research grant of $5,000 obtained to perform research work as part of her university degree. marley's will states that all of her assets should go to her surviving husband.

Answer 1

Marley's RRSP and real estate, including her home and research grant income, must be addressed in her final tax return. The RRSP's full value may be taxable, but it could also be rolled over to a spouse. The home's transfer to the spouse could defer capital gains tax.

Step-by-step explanation:

The question deals with the tax implications and asset distribution that occur after the death of an individual who has contributed to a Registered Retirement Savings Plan (RRSP) and owns real estate. Upon death, Marley's RRSP will be included in her final tax return, with the full value being taxable as income in the year of death unless it can be rolled over to the spouse tax-free, which is commonly allowed under Canadian tax law. The home will receive a deemed disposition at fair market value, potentially resulting in a capital gains tax if the value has increased since its purchase. However, when property is transferred to a surviving spouse, it is normally possible to defer the capital gains tax until that spouse sells the property or passes away. Marley's will directs all assets to her surviving husband, and thus the handling of these assets and any associated tax implications would typically be addressed during the estate settlement process.