A distribution coming out of retirement compensation arrangement (RCA) that was generated in respect of the taxpayer’s employment but paid pursuant to a court order or separation agreement to the taxpayer’s former spouse constituted income to the taxpayer pursuant to s. 56(1)(x) even though received instead by the former spouse (in whose hands it was excluded from income pursuant to s. 56(1)(z)(ii).)
The Directorate found that, as the former spouse was in receipt of “remuneration” as per para. (b.1) of the definition thereof Reg. 100(1) and was thus an “employee” under the Reg. 100(1) definition, for purposes of determining the amount to be withheld under Reg. 102 the “employee” was the former spouse, and that the amount withheld was to be remitted on account of the former spouse’s income tax for the year.
The Directorate recognized that this generally would produce a “misalignment,” i.e., any income tax withheld on the RCA Payment could be claimed upon the filing of the former spouse’s income tax return for the year and, conversely, the taxpayer would have no amount to report on account of the income tax withheld for the year in respect of the RCA Payment inclusion to the taxpayer.
Under Reg. 200(1), a T4A-RCA Form was required to be issued to the former spouse in respect of the RCA Payment.