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.
Principal Issues: Are all the relevant parties required to consent to this change in directed person from time to time?.
Position: Claimant need only send notice to issuer of the annuity of the change provided this clause is allowed in the original documents and agreed to earlier by all interested parties.
Reasons: Paragraph 5 of IT-365R2
ITA REFERENCE: 56(1)(d)
HAA: 7328-2
SECURITY: For distribution
XXXXXXXXXX 2004-008486
C. Tremblay, CMA
957-2139
July 14, 2004
Dear XXXXXXXXXX,
Re: XXXXXXXXXX
This is in reply to your letter of July 7, 2004, concerning the above-noted subject. You advised us that XXXXXXXXXX the Canada Revenue Agency (the "CRA") has approved a new form of structured settlement payment direction. You seek clarification on our involvement in the matter.
The CRA issued an opinion letter on May 26, 2004, of which a severed version was faxed to you on July 8, 2004, wherein we agreed that the wording suggested by the writer would not cause the subsequent recipient of the payments to be taxable, provided all the other requirements of a structured settlement as set out in paragraph 5 of IT-365R2 were met. We advise you that our letter was not an advance income tax ruling nor did it state that the suggested wording could be the only acceptable wording or that the consent of all the interested parties was not required. Generally, we opined on suggested wording that could be used by the interested parties to allow the claimant, should his or her circumstances change, to name and change a secondary payee from time to time, as the recipient of the remaining guaranteed payments should the claimant die. In our view, all interested parties, the casualty insurer, the life insurer, the assignment company (if one exists) and the claimant must agree to allow such a clause as part of the structured settlement arrangement.
We trust our comments are of assistance.
Steve Tevlin
For Director
Financial Industries Division
Income Tax Rulings Directorate
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