Principal Questions: Whether an amount deemed received out of or under a RRIF constitutes a "payment out of or under a RRIF" for the purposes of the definition of "pension income" in subsection 118(7)?
Position: No. For an amount to be considered "as a payment out of or under a RRIF" for the purposes of the definition of "pension income" in subsection 118(7), a payment shall arise from the performance of an agreement between the RRIF carrier and the annuitant and delivered in satisfaction of an obligation. An amount deemed to be received under subsection 146.3(6) is not in fact a "payment out of or under a RRIF" because no payment is made by the RRIF carrier and no payment is actually received by the last annuitant under the RRIF.
Reasons: Prior positions.
FINANCIAL STRATEGIES AND FINANCIAL INSTRUMENTS ROUNDTABLE, 11 OCTOBER 2019
2019 APFF CONFERENCE
Question 9
Registered Retirement Income Fund: Payment received versus payment expected
Questions to the CRA
(a) Is a "payment received" from a registered retirement income fund ("RRIF") considered to be a "payment out of or under” a RRIF for the purposes of the definition of "pension income" in subsection 118(7) of the Income Tax Act (the "Act")?
(b) If yes, how can Technical Interpretations 2012-0453151C6 (footnote 1) and 2017-0685001E5 (footnote 2) be reconciled?
(c) If no, could the CRA clarify the meaning of the expression "payment out of or under” in relation to the splitting of the RRIF benefit under the definition of "pension income" in subsection 118(7)?
CRA Response
For an amount to be considered as “a payment out of or under a registered retirement income fund” for the purposes of subparagraph (a)(iii) of the definition of "pension income" in subsection 118(7), the amount must be paid in satisfaction of an obligation between the issuer and the annuitant of a RRIF.
In Question 8 of this Roundtable of October 5, 2012 (footnote 3), the CRA clarified that an amount deemed to be received under subsection 146.3(6) by the deceased last annuitant of a RRIF is not a payment provided out of or under a RRIF. Indeed, when subsection 146.3(6) applies, no payment is actually made by the RRIF's carrier to the deceased last annuitant.
Consequently, an amount that is deemed to be received under subsection 146.3(6) is not eligible for pension income splitting under section 60.03, nor for the pension tax credit under subsection 118(3).
As part of Question 2 of the October 6, 2017 Roundtable (footnote 4), the CRA was asked whether it was possible to claim the deduction under subsection 146(8.2) in computing income in the year of the annuitant's death, in the event that an individual over-contributed to the individual’s registered retirement savings plan (“RRSP”) in a taxation year and died in the subsequent taxation year. The taxpayer died before withdrawing excess premiums from the RRSP, which the taxpayer did not deduct pursuant to subsection 146(5).
Under the conditions for the application of subsection 146(8.2), in order for an amount to be deductible in respect of a taxpayer in a particular taxation year (footnote 5), it is required inter alia that a payment from an RRSP in respect of undeducted premiums of the taxpayer, be received by the taxpayer in the year and that such payment is otherwise included in computing the taxpayer’s income for the year.
In the situation described, since the taxpayer died before having withdrawn the deducted premiums, the taxpayer would no longer be able to receive any payments related to those premiums. However, in its response, the CRA indicated that in that specific context, it "generally accepts that an amount deemed to be received by a deceased annuitant under subsection 146(8.8) and included in the annuitant’s income for the year of death under subsection 146(8) and paragraph 56(1)(h) should be treated as a payment received by the annuitant for the purposes of subsection 146(8.2).”
Comments made with respect to subsection 146(8.2) constitute an administrative concession and are applicable only with respect to that subsection.
Nathalie Boyer
(450) 926-7039
October 11, 2019
2019-081328
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 CANADA REVENUE AGENCY, Technical Interpretation 2012-0453151C6, October 5, 2012.
2 CANADA REVENUE AGENCY, Technical Interpretation 2017-0685001E5, October 23, 2017.
3 2012-0453151C6, supra footnote 1.
4 CANADA REVENUE AGENCY, Technical Interpretation 2017-0710681C6, October 6, 2017.
5 Which must be one of the years set out in paragraph 146(8.2)(c).