CRA finds that a payment out of a pension plan to a beneficiary of deceased employee was a pension rather than death benefit payment

A U.S. citizen is resident in Canada and was the beneficiary of a deceased U.S resident who had been a retired member of a U.S. public pension plan. CRA would consider a payment received under the plan by the beneficiary to be of a “superannuation or pension benefit” (includible in income under s. 56(1)(a)(i)) rather than of a “death benefit” (generally includible under s. 56(1)(a)(iii) but subject to a $10,000 exclusion from income). Relief from inclusion under s. 56(1)(a)(i) would be provided under Art. XVIII, para. 1of the Canada-U.S. Treaty to the extent of the amount that would be excluded from taxable income in the U.S. if the recipient were a resident thereof (e.g., respecting a deduction under Code s. 691(c)(1) respecting a pro rata portion of U.S. estate tax).

Neal Armstrong. Summaries of 2014-0525681E5 under s. 248(1) - superannuation or pension benefit, Treaties - Art. 18.