Re: Assignment of Liability-Structured Settlements
This is in reply to your letter of January 4, 1991 requesting a technical interpretation in connection with the assignment of liability in relation to a structured settlement for damages arising from a personal injury or death claim by an individual. You provide a hypothetical fact situation as the basis for your requested technical interpretation and presumably as a model for future advance income tax ruling requests. Included with your request was a copy of a Minutes of Settlement, a Judgment and a Conditional Assignment Agreement relating to your hypothetical fact situation.
The example that you set out is quite specific and it appears that it may relate to a particular contemplated transaction or transactions. Assurance as to the tax consequences of contemplated transactions can only be given in response to a request for an advance income tax ruling. The procedure for requesting an advance income tax ruling is outlined in Information Circular 70-6R2. If you wish to obtain any binding commitment with respect to actual cases with facts similar to your example, an advance income tax ruling application should be submitted. Although we are unable to provide any binding assurance here with respect to the queries you have raised, we do provide the following general comments for your information.
Our Comments
The Department has recently issued a favourable advance income tax ruling concerning a structured settlement that involved the assignment of a settlement agreement to an appropriate assignee in circumstances similar to those outlined in your hypothetical example. We note that one substantial difference between the ruling and your hypothetical example is the fact that the assignee in the ruling was a separate entity from the insurance company which issued the annuity. The consequences of an assignment to the issuer of the annuity would have to be carefully considered in the context of an actual fact situation. Apart from this consideration, we are reasonably confident at this time that, should a ruling request be received in the near future in which the assignment of the settlement agreement to an appropriate assignee was an integral part and it otherwise complied with the provisions of paragraph 5 of Interpretation Bulletin IT-365R2, it would receive a favourable response.
We trust our comments will be of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch