39574-1 5-911813
Dear Sirs:
Re: 24(1) Income Averaging Annuity Contract ("IAAC")
We are writing in reply to your facsimile transmission of June 7, 1991, in which you ask whether subsection 61.1(1) and paragraphs 56(1)(d), (e) and (f) of the Income Tax Act (the "Act") would apply to cause an amount to be included in an annuitant's income on the
24(1)
You also ask whether the cessation of equal annual annuity payments could cause the IAAC to lose its status as such. This may occur since the liquidator may make only infrequent distributions to the annuitant.
Where an IAAC is assigned by one financial institution to another and the assignee is subject to the same terms and conditions to which the assignor was subject, it is our view that the assignment does not in and of itself cause the IAAC to cease to be such within the meaning of subsection 61.1(1) of the Act unless the terms of the IAAC provide for cessation upon assignment. Nor would such an assignment, in and of itself, be deemed to cause the annuitant to receive an amount under the IAAC such that paragraph 56(1)(d),(e) or (f) of the Act would apply. Although the foregoing comments are not binding on the Department, we hope they are of assistance.
With respect to your second query, the Department has taken an administrative position that the suspension of the annual or more frequent equal annuity payments pending the assignment of the IAAC to a successor financial institution will not take the contract out of the definition contained in paragraph 61(4)(b). as long as this is a 24(1)
24(1) If you have any questions concerning the administrative position, please contact Mr. Guy Levesque, Chief, Taxpayer Assistance Section at the following address or phone number:
Enquiries and Taxpayer Assistance Division Assessing and Enquiries Directorate Revenue Canada, Taxation Ottawa, Ontario K1A OL8 (613) 957-8090
The Assessing and Enquiries Directorate has also confirmed that, in the event of an assignment of the IAAC 24(1) in the circumstances described in paragraph two above, no official slip should be issued.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
c.c. Mr. Guy Levesque