Nearly six years after Canada introduced COVID-19 support programs, the Canada Revenue Agency continues to pursue benefit repayments in surprising cases, including one recently decided by the Tax Court involving a deceased taxpayer.
Estate Faces Unexpected CRB Repayment Demand
In a remarkable case decided in late October 2025, the Canada Revenue Agency demanded that the estate of a deceased taxpayer repay $18,600 in Canada Recovery Benefit (CRB) payments that the individual had received before his untimely death in December 2021. The taxpayer died at a young age, leaving his estate to handle the unexpected financial claim from the federal government.
The Canada Recovery Benefit replaced the earlier Canada Emergency Response Benefit (CERB), providing financial support to employees and self-employed workers who lost income due to the pandemic. To qualify, applicants needed to have earned at least $5,000 in employment or self-employment income in 2019, 2020, or during the twelve months before their application, and to have stopped working due to COVID-19.
How RRSP Values Triggered Full Benefit Clawback
The repayment dispute centered on how the CRA calculates income for CRB repayment purposes. Under the Canada Recovery Benefits Act, recipients needed to repay benefits if their annual net income - excluding the CRB payments themselves - exceeded $38,000. The repayment formula required returning 50 cents for every dollar of income above this threshold, up to the total amount of benefits received.
In this case, the deceased taxpayer held two Registered Retirement Savings Plans (RRSPs) with a combined fair market value of $74,353. Upon his death, with no surviving spouse or common-law partner to roll over the funds, the entire value of the RRSPs was added to his final income tax return for 2021.
This substantial income inclusion pushed the taxpayer's 2021 income well above the CRB repayment threshold, requiring the estate to repay the entire $18,600 in benefits he had received earlier that year.
Legal Arguments and Broader Implications
The estate's representative argued before the Tax Court that the RRSP value shouldn't count as "income earned" for repayment purposes, suggesting Parliament intended the repayment rules to apply only to employment or self-employment income. However, the CRB Act specifically references the Income Tax Act definition of income, which includes the deemed disposition of RRSPs upon death.
This case raises important questions about whether it represents sound policy to require repayment of benefits when taxpayers become retroactively ineligible due to circumstances beyond their control. Financial experts note that similar clawback principles could potentially affect other benefits, including Old Age Security, creating concerns for retirement planning.
The court's decision to uphold the CRA's interpretation highlights the importance of understanding how various income sources - including those triggered by life events like death - can impact eligibility for government benefits and potential repayment obligations that may extend to estates.
