JAN 16 1987
SMALL BUSINESS & GENERAL DIVISION D.Y. Dalphy 957-2134 Your file: HAV 4004-1
RE: Sharing of Canada Pension Plan Benefits Between Spouses
This is in reply to your memorandum of November 27, 1986 wherein you enquire whether the new attribution rules or other relevant sections of the Income Tax Act (the "Act") will apply in respect of recent amendments to the Canada Pension Plan ("CPP") which permit an assignment of a portion of a CPP pension to a taxpayer's spouse.
Section 64.1 of the CPP permits the Minister of National Health and Welfare (the "Minister") to approve the assignment of a portion of a contributor's retirement pension to his spouse where either the contributor or his spouse has applied for an assignment of such benefits. Subsection 64.1(2) provides that neither a court order nor a spousal agreement are binding on the Minister unless certain limited conditions are met.
In our view, both subsection 56(2) of the Act and the new attribution rules may apply to the assignment of CPP benefits to a taxpayer's spouse, depending on the circumstances of each situation.
Subsection 56(2) of the Act
Paragraph I of Interpretation Bulletin IT-335 provides that subsection 56(2) of the Act requires a taxpayer to include an amount not received by him in his income if all of the following conditions are met:
1. There is a payment or transfer of property to a person other than the taxpayer.
2. The payment or transfer is pursuant to the direction of or with the concurrence of the taxpayer (this may be implicit).
3. There is a benefit to the taxpayer or a benefit the taxpayer wishes to confer on the other person.
4. The taxpayer would have been taxable on the amount under some other section of the Act if it had been paid to him.
Where an assignment of CPP benefits to a taxpayer's spouse is approved by the Minister it is our view that the criteria in #1 and #4 above would be met and, as such, the necessary focus would be upon whether the criteria in #2 and #3 above would be satisfied.
In our opinion, in situations where a taxpayer has applied to the Minister for an assignment of a portion of his CPF pension to his spouse and the Minister has granted such a request, the requirements of subsection 56(2) of the Act would be fulfilled. Accordingly, amounts received by the taxpayer in respect of his CPP benefits and amounts received by the taxpayer's spouse in respect of CPP benefits assigned to the spouse would be included in the taxpayer's income pursuant to subsection 56(2) and clause 56(1)(a)(i)(B) of the Act.
Where, however, the spouse of a taxpayer applied for such an assignment, it will be necessary to determine whether the taxpayer acquiesced in or concurred with the assignment. In our view, where the taxpayer, in good faith exercised his appeal rights under section 83 of the CPP, the conditions of subsection 56(2) of the Act would not be met; amounts received by the taxpayer and his spouse would be included in their respective incomes pursuant to clause 56(1)(a)(i)(B) of the Act. If, however, a taxpayer acquiesces in an assignment of his CPP benefits to his spouse, the taxpayer would be required (pursuant to subsection 56(2) and clause 56(1)(a)(i)(B) of the Act) to include in his income amounts received by him in respect of his CPP benefits and amounts received by his spouse in respect of the assignment of his CPP benefits to his spouse.
Attribution Rules
Although the attribution rules may apply in certain situations where a CPP pension is assigned to a taxpayer's spouse, we are of the opinion that since subsection 56(2) of the Act may apply and as it is broader in scope than the attribution rules there is no need at this time to consider this issue.
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs branch