M. Evans (613) 957-2133
DEC 19 1986
Dear Sirs:
This is in reply to your letter of October 30, 1986, concerning the taxation of split registered pension benefits on the breakdown of a common-law relationship under the Manitoba Pension Benefits Act (MPBA). We apologize for the unavoidable delay in responding.
We presume you are referring to a division of pension benefits on the termination of a common-law relationship pursuant to subsection 27(2) of the MPBA. Under subsection 27(3) of the MPBA, a person who becomes entitled to a portion of the pension benefit credit of a member or former member of a pension plan may choose one of the following three options with respect to the portion vested in that person:
a) leave the pension benefit credit in the pension plan and receive the appropriate portion of the payments payable under the plan,
b) have the vested portion transferred to another pension plan in which the person is a member, or
c) have the vested portion transferred to a registered retirement savings plan.
Under option a), it is our opinion that when the pension benefits are paid out of the plan to the member and his or her former common-law spouse, the amount received will be included in their respective incomes pursuant to subparagraph 56(l)(a)(i) of the Income Tax Act (the Act) as a "superannuation or pension benefit" as that term is defined in subsection 248(1) of the Act. The member and his or her former common- law spouse will then be entitled to the pension deduction under section 110.2 of the Act to the extent permitted in respect of their relative interests in the pension payments.
Under either of options b) or c), the choice to make the transfer referred to will result in an income inclusion under subparagraph 56(l)(a)(i) of the Act in the hands of the former common-law spouse for the amount transferred. A transfer of the former common-law spouse's pension benefit credit created by the division of the member's pension benefits to either a registered pension plan in which he or she is a member or to a registered retirement savings plan under which he or she is the annuitant will qualify for a tax-free rollover under paragraph 60(j) of the Act.
In view of the above, we confirm your understanding that amounts received by a former common-law spouse pursuant to subsection 27(2) of the MPBA are not maintenance payments for purposes of paragraphs 56(1)(c.1) and 60(c.1) of the Act.
We trust this information will be of assistance.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs branch
56(1)(a)(i) 110.2 60(j) 56(1)(c.1) 60(c.1)