Crocus Fund Receivership Being Wrapped Up

Evelyn Jacks

The investors of the Crocus Fund will be receiving a final settlement in 2022.  Specifically, the payment will be 36 cents per share, and it will be made after September 30, 2022.  While most people will have held these shares in their RRSP account and will have no tax consequences, the disposition of these investments in non-registered accounts will need to be reported.

So what are the tax consequences of the final distribution, and how will they be calculated?

Although the shareowners may have received a labour-sponsored funds tax credit when the shares were purchased, the cost of the share is not adjusted for the government assistance, but the capital gain (or loss in this case) is computed in the normal manner. As this is the final settlement, the shares would be deemed to have been disposed of after the final payment and the capital loss computed as:

Capital gain (loss) = Proceeds of disposition – Adjusted cost base.

The adjusted cost base in this instance would be the cost of the shares purchased less any amounts already received from the fund in respect of those shares.

But what if the original shareholder has since passed away?  There should have been a deemed disposition of the holdings at FMV – which would have been little to nil - at that time.

We spoke to Larry Frostiak, FCPA, FCA, CFP, TEP who had the following thoughts on the matter:

First, if someone died holding shares of the Crocus Fund, the legal representative may have recorded a deemed disposition at FMV. With the FMV thought to have been zero or nominal, this may have triggered a capital loss on death, and the legal representative could have then used that loss to reduce other taxable income reported on the T1 final return. 

If the estate was then fully administered out and wound-up, proceeds payable on the Crocus shares would become payable to the beneficiaries of the Estate.   It might now be difficult for the Receiver of the Crocus Fund to track down registered owners of the fund. 

Assuming that the Receiver can do so, beneficiaries who receive the proceeds to be distributed in 2022 via an Estate would need to report a capital gain equal to the proceeds minus an ACB that would likely be zero on their 2022 return. Presumably, it would be the responsibility of the legal representative of the estate to handle this and to track down the beneficiaries and remit payment to them accordingly.

On that last point,  if the estate donated the shares to a registered charity, in order to receive a tax receipt, the remaining payout must go to the charity as a qualifying gift must be irrevocable. 

It’s clear that those individuals holding Crocus Fund shares in non-registered accounts will face a more complicated filing scenario than others in the 2022 tax filing year.  Executors need to be alert to their responsibilities as well in this case.

Best to see a qualified tax specialist for help.