7 October 2011 Roundtable, 2011-0420781C6 F - Transfert de RPA à un REER au décès. -- summary under Subsection 104(27)

The will of a deceased taxpayer, who had been a member of a registered pension plan ("RPP"), provided for the bequest of all his property to his dependent minor daughter, with an infirmity and six years of age, as sole legatee. All such bequeathed property was to be retained in the estate until she attained 25 years, but with rights of encroachment by the executor. In the year of the death, the deceased's RPP will pay the estate $140,000 as a lump sum under the RPP.

Will a s. 104(27) designation ensure that the income received by the daughter will retain its character as pension income for the purpose of the s. 60(l) deduction? The general response of CRA included:

By virtue of subparagraph 104(27)(c)(i), where a testamentary trust receives a benefit under an RPP, the beneficiary's share in the trust of the benefit (with the exception of any portion of that the amount that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from an RPP that is included in computing the recipient's income for a particular year in respect of payment referred to in clause 60(l)(v)(B.01) if the following conditions are satisfied:

• The testamentary trust was resident in Canada throughout its taxation year.
• Such trust indicated in its income tax return filed for the year under Part I of the Income Tax Act, the beneficiary's share, equal to the portion of the benefit, that it did not designate to any of its other beneficiaries.
• It is reasonable to consider the recipient's share to be part of the amount that, pursuant to subsection 104(13) was included in computing the beneficiary's income for a particular taxation year.
• The benefit is a single amount within the meaning of subsection 147.1(1).
• The single amount was paid to the trust as a consequence of the death of the settlor of the trust.
• The beneficiary was, immediately before the death of the settlor of the trust, the child or grandchild of the settlor and financially dependent on the settlor because of a mental or physical infirmity.