15 April 1991 Income Tax Severed Letter

April 15, 1991

Ottawa District Office                       Head Office
                                             Rulings Directorate
                                             D. Duff
Attention:  Mr. P. Middlestead               957-3498
            Director
                                             7-910816

Pension PaymentsYour memorandum of March 1, 1991, to Registered Pension Division, regarding24(1)

It is defined as an additional bridging benefit in paragraph 8503(2)(1) of the draft regulations of the Income Tax Act (the "Act"). This provision permits an additional benefit to be paid if it does not exceed the public pensions to be received at age 65 and pension payments otherwise received after age 65 are reduced. Accordingly, it is a pension benefit which is required to be included in income pursuant to paragraph 56(1)(a)(i) of the Act.

A registered pension plan is prohibited from making a loan to a member pursuant to subsection 8512(1) and paragraph 8502(h) of the draft regulations of the Act. If such a loan is made the plan becomes a revocable plan per paragraph 147.1(11) (C) of the Act which can result in its registration being revoked by the Minister.

Neither the fact that the later reduction in pension payments is calculated as a loan repayment nor the decision of the Board of Referees of Employment and Immigration Canada that it is a loan is a deciding factor in determining whether it is taxable income according to the Act.

                              24(1)

There is no provision allowing the deduction of ordinary loan repayment from income. In summary, the arrangement simply permits the pensioner to choose a larger pension before age 65 and smaller after or vice versa.

                                   24(1)

for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental

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