G. Thornley (613) 957-2101
NOV 10 1988
Dear Sirs
Re: Prescribed Annuity Contract ("PAC")
This is in reply to your letter of October 12, 1988 requesting a ruling as to whether or not section 304(l)(e)(i) of the Income Tax Regulations would disqualify an annuity, whose payments are to be adjusted each year in accordance with the cost of living, from being considered a PAC.
Our comments
In accordance with Information Circular 70-6R, advance income tax rulings will only be given in respect of proposed transactions. Thus our comments are by way of opinion or technical interpretation only.
Subparagraph 304(1)(e)(i) of the Regulations has been replaced by subclause 304(1)(c)(iv)(A) which is applicable to taxation years commencing after 1986. It reads, however, basically the same as previously.
An annuity whose payments are to be adjusted each year in accordance with the cost of living would fail to be a prescribed annuity contract under either of the provisions cited above.
We trust this is the information you require.
Yours truly,
ORIGINAL SIGNED by Wm. R. McColm
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch