15 November 1999 External T.I. 9927025 - ASSIGNMENT OF SETTLEMENT

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.

XXXXXXXXXX		992702
C. Tremblay
Attention: XXXXXXXXXX 

November 15, 1999

Dear XXXXXXXXXX:

This is in reply to your letter of October 5, 1999, wherein you ask whether a disability insurer who wishes to close its books on a particular file involving an insurance claim or settlement payable by periodic payments, could assign the ongoing obligations to another insurer which will carry out the obligations that the primary insurer would have been required to implement. The situation you are concerned with is one which the disability payments would otherwise be non-taxable to the recipient in accordance with paragraph 3 of Interpretation Bulletin IT-223.

Our Comments

In our view, in and by itself, an assignment of an ongoing obligation prior to any "funding transactions", to another insurer who will carry out the obligations of the long term disability settlement of the primary insurer would generally not result in the policyholder being subject to tax under any provisions of the Act. In this regard, a "funding transaction" would be one similar to that described in paragraph 5(c) of IT-365R2 (e.g. purchase of an annuity contract). Any other situation involving "assignments" would have to be reviewed on a case by case basis.

We trust our comments are of assistance

Your truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch