29 October 1997 External T.I. 9726395 - MPA PENSION SPLIT, ATTRIBUTION

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Would a spouse be taxed on pension income received as a result of a court ordered division of pension benefits under the Matrimonial Properties Act (Saskatchewan) where there is no marriage breakdown?

Position:

No

Reasons:

There is no provision in the Act allowing for the splitting of the pension benefits where there is no marriage breakdown. Subsection 74.1(1) would be applied to have the full amount of the pension taxed in the plan member's hands.

972639
XXXXXXXXXX M.P. Sarazin

Attention: XXXXXXXXXX

October 29, 1997

Dear Sirs:

Re: XXXXXXXXXX (the "Taxpayer")

This is in reply to your undated letter that we received on August 15, 1997, wherein you requested a written interpretation on behalf of the above-noted Taxpayer and his spouse.

The Court of the Queen's Bench for Saskatchewan ordered an equal division of the Taxpayer's XXXXXXXXXX Annuity on account of his pension with XXXXXXXXXX and the plan administrator, XXXXXXXXXX, was ordered to divide the XXXXXXXXXX pension into two equal payments, one for the Taxpayer and one for the Taxpayer's spouse even though there has not been a matrimonial breakdown. Consequently, the Taxpayer's spouse currently receives 50% of the Taxpayer's pension. We have been asked to provide a technical interpretation that the amount received by the Taxpayer's spouse would be taxed in her hands as pension income under paragraph 56(1)(a) of the Income Tax Act (the "Act") and the Taxpayer would only have to include actual amount he receives in his income under paragraph 56(1)(a) of the Act.

The situation described in your request is an actual fact situation relating to completed transactions and, as noted in paragraph 22 of Information Circular 70-6R3, tax services offices are responsible for providing written opinions on completed transactions. However, we offer the following general comments.

Comments

We can only provide the following general comments because there are insufficient facts and the Judgment issued by XXXXXXXXXX is very vague in that it orders a division of payments without any reference to any particular legislation. We will assume that the division is under the Matrimonial Properties Act (Saskatchewan) (the "MPA").

Subparagraph 147.1(2)(a)(ii) provides that a pension plan may not be registered unless it meets certain prescribed conditions. In addition, subsections 147.1(11), (12) and (13) provide that a pension plan's registration may be revoked where the pension plan does not comply with the prescribed conditions or where the pension plan is not administered in accordance with the terms of the plan as registered. Subsection 147.1(15) provides that the terms of a plan would include any terms that have to be included by reason of the Pension Benefit Standards Act, 1985 (the "PBSA") or a similar law of a province. Where the division of the pension benefits is allowed under the PBSA or a similar law of Saskatchewan, revocation would not result. However, we do not believe that the PBSA or a similar law of Saskatchewan allows for the division of pension benefits other than as a result of a marriage breakdown and, if there is a division of pension benefits under the MPA without any support under the PBSA or a similar law of Saskatchewan, the pension plan could become a revocable pension plan.

If there is a division of the pension benefits, we are of the view that the division would constitute a transfer of property for the purposes of subsection 74.1(1) of the Act and the pension benefits received by the Taxpayer's spouse would be deemed to be pension income included in the Taxpayer's income under the Act.

If you take the position that there has been no division of benefit entitlements under the pension plan and the Judgment only requires a splitting of the payment then, in our view, the Taxpayer would be considered to have received the full amount of the pension and the full amount would continue to be taxed in the Taxpayer's hands.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c.Registered Plans Division

Regina Tax Services Office