Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
(i) Can the credit allowed under subsection 217(5) be claimed by the spouse under section 118.8?
(ii) Is section 118.8 applicable if neither the taxpayer nor his spouse made an election under section 217 for Canadian pension income?
Position: (i) No. (ii) No.
Reasons:
(i) No provision in the Act to allow the transfer of such credit.
(ii) If no election under section 217 was made, it is not possible to determine whether there is any credit available to be transferred to and used by the spouse.
Issue Sheet
File: 993267
Date: February 10, 2000
Simon Leung
Subject: sections 217 and 118.8
Issue #1
If a non-resident person has made a section 217 election and neither all nor substantial all of his income was included in computing the amount described in subparagraph 217(3)(b)(i) of the Act, can the tax credit allowed under subsection 217(5) which was not used by him to reduce his tax payable be transferred to his spouse under section 118.8 of the Act?
Analysis
In normal situations, there would not be any unused subsection 217(5) credit because such credit is limited to a maximum of 17% of the Canadian Benefits unless the taxpayer is eligible to claim deductions which would reduce his or her income to an amount less than the Canadian Benefits.
In the event there is an unused subsection 217(5) credit, there is no provision in the Act to permit such credit to be transferred to the taxpayer's spouse. A subsection 217(5) credit no longer retains the character of a non-refundable tax credit described in sections 118 to 118.94 of the Act. It is a different credit although its computation may depend on the amounts of the credits described in sections 118 to 118.9.
In the case where all or substantially all of the income of the taxpayer has been included in computing the amount described in subparagraph 217(3)(b)(i) of the Act, subsection 217(4) instead of subsection 217(5) applies such that the taxpayer's claim for the non-refundable tax credits under sections 118 to 118.94 would not be denied. In such a case, any credits referred to in section 118.8 not used by the taxpayer would be eligible to be transferred to the taxpayer's spouse under that section.
Conclusion
Where subsection 217(5) applies, the credit so computed under that subsection is not allowed to be transferred to the taxpayer's spouse.
Issue #2
Whether section 118.8 is applicable if neither the taxpayer nor his spouse made an election under section 217 for their Canadian source pension income.
Analysis and Conclusion
No. If neither the taxpayer nor his/her spouse made an election under section 217 of the Act, the Canadian source pension income will be subject to tax under Part XIII of the Act as modified by the provisions of a tax treaty, if applicable. Since no election was made by the taxpayer nor his/her spouse, it is not possible to determine whether all or substantially all of their income has been included in computing the amount described in subparagraph 217(3)(b)(i) of the Act, respectively. As discussed above, if neither all nor substantially all of their income was included in computing such an amount, subsection 217(5) of the Act would apply and there is no provision in the Act to allow the subsection 217(5) credit to be transferred to the spouse.
If the taxpayer can meet the all or substantially all test referred to in subsection 217(4) of the Act, he or she should make an election under 217(2) of the Act such that any credits referred to in sections 118.8 not used by the taxpayer would be allowed to be transferred to his or her spouse.
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