Revenue Canada Taxation Head Office
N.M. Sheerin (613) 957-2135
MAR 15 1988
Dear XXXX
This is in reply to your letter of January 20, 1988, concerning the income tax implications of a provision in your separation agreement which entitles you to receive a portion of your husband's future pension payments.
We understand that the full amount of your husband's pension benefits will be paid to him and that he will be required to pay a portion of his pension benefits to you in accordance with the calculation stipulated in your separation agreement dated July 26, 1987.
In these circumstances, we confirm that:
(i) Your husband would be taxable in respect of his share of the pension benefits as apportioned in the separation agreement,
(ii) The amount that represents your share of the pension benefits would be taxable in your hands as pension income under subparagraph 56(1)(a)(i) of the Income Tax Act,
(iii) Both you and your husband would be entitled to claim the pension income deduction or, as proposed under Tax Reform, the pension tax credit, to the extent permitted in respect of your relative interests in the pension payments.
When the pension payments are due to commence, a reduction of the amount of tax withheld might be arranged on the basis of the pension apportionment required by your separation agreement if your husband contacts the Source Deductions Section of his District Taxation Office. The tax deducted would then be based on his share of the pension only.
We trust these comments will be of assistance to you.
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch