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Death benefits from life insurance policies are not subject to ordinary income tax. Beneficiaries may have the option of taking a death benefit in installments or as a lump sum.
A final return cannot be submitted electronically via NETFILE. You must mail it to the deceased tax centre. Find the appropriate mailing address here.
A Final Return must be filed for every person who dies. In addition, you may be able to reduce or eliminate tax by reporting income from specific sources earned during specific time periods in optional T1 returns.
As the legal representative, you are responsible for filing a return for the deceased for the year of death. ... If you have to file a return for a year before the year of death, use an Income Tax and Benefit Return for that year. ... You have to file a T3 return to report the income the estate earned after the date of death.
The amount is taxable in most circumstances. The CPP death benefit is normally included in the estate's income and reported on the estate's trust return for the year the amount was received.