Principal Issues: [TaxInterpretations translation] Can a pensioner under age 65 split RPP and RRSP income in the year of the transferee's death?
Position: The pensioner can split his RPP income but not his RRSP income.
Reasons: Income from the RPP is "qualified pension income" as defined in paragraph 118(7)(a). The pensioner's RRSP income is not received as a consequence of the death of the pensioner's spouse or common-law partner as required by paragraph 118(7)(b) of the definition of "qualified pension income."
2009-033745 XXXXXXXXXX Catherine Ayotte, Notary, M. Fisc. November 4, 2009
Dear Madam,
Subject: Pension income splitting
This is further to your email of August 18, 2009, in which you asked us to clarify the type of income that can be split for a year under section 60.03 when the pensioner is under age 65 and the transferee dies in the year.
Please note that unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
It appears to us that the situation described in your letter may constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of the Directorate to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves a specific taxpayer and a completed transaction, you should provide all relevant facts and documentation to the appropriate Tax Services Office for its views. However, we are prepared to provide the following general comments.
Facts
Madame, aged 66, is the "pension transferee" as defined in section 60.03. Monsieur, aged 64, is the "pensioner" as defined in section 60.03. For the year in question, the pensioner received an annual life annuity from his registered pension plan ("RPP") and pension payments under his registered retirement savings plan ("RRSP"). The pension transferee died in June of that year.
Your Question
You wish to know what type of income the pensioner will be able to split with the pension transferee.
Our Comments
The amount that a pensioner may split with a pension transferee is determined by the "split-pension amount" formula in Section 60.03. Element A of that formula represents the pensioner's "eligible pension income" for the year. Under subsection 118(7), "eligible pension income" for an individual under age 65 is the individual's "qualified pension income", also defined in subsection 118(7).
“Qualified pension income" includes amounts included in income that an individual received as a payment in respect of a life annuity out of or under a superannuation or pension plan, and amounts received as a payment of an annuity from an RRSP as a consequence of the death of a spouse or common-law partner.
In your example, the pensioner could split annuity payments from his RPP, which is a superannuation or other pension plan. These amounts qualify as "qualified pension income" under paragraph 118(7)(a). However, the amount of the annuity paid out of his RRSP is not "qualified pension income" because it is not received as a consequence of the death of his spouse or common-law partner as required by paragraph 118(7)(b) of the definition of "qualified pension income". Therefore, the latter amount cannot be split with the pension transferee.
We hope that our comments will be of assistance.
Best regards,
Ghislain Martineau
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.