10 April 2000 External T.I. 2000-0018865 - INCOME SPLITTING

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: The issue is whether a retired teacher can split his pension income with his spouse and request the payor to reissue the information slips.

Position: No, taxpayer is the retired teacher and must report the income

Reasons: The retired teacher is the one legally entitled to the income

XXXXXXXXXX 2000-001886

April 10, 2000

Dear XXXXXXXXXX:

This is in reply to your letter of April 3, 2000, regarding your T4 slips from the XXXXXXXXXX (the Fund) for the years XXXXXXXXXX.

You indicated that you are a retired teacher, XXXXXXXXXX years of age. In XXXXXXXXX, you became disabled and took an early retirement 2 years later, in XXXXXXXXXX. You also stated that you made arrangements to have your disability and pension income cheques from the Fund, deposited directly in your wife's bank account. Although you had requested that the Fund issue two cheques (one to you for 50% of the income and another to your wife for the other 50%), only one cheque was issued in your name.

You have recently spoken to an official employed by the Fund, requesting that it revise the income slips for XXXXXXXXXX, so that there would be two separate forms and you and your wife could file a return, each reporting 50% of the income from the Fund. Your view is that half of the retirement income belongs to your wife, because she participated in running the household during the years you taught. You ask who has the final word on this: the Fund or the Canada Customs and Revenue Agency.

Our Comments

The Fund has the legal responsibility under the income tax legislation to correctly prepare and issue the information slips for its retired employees. Further, the law requires that such slips be made out in the name of the individual who is legally entitled to the pension income for each taxation year.

In your case, the Fund would have to make the slip out to you, the retired teacher (even though you directed that the payments be deposited in your spouse's bank account), since you are the one legally entitled to all of the income payments. Furthermore, there is no provision in the Act that would allow you to split the pension income with your wife in your particular circumstances or in any other situation. If, on the other hand, you were to predecease your spouse so that she became legally entitled to survivor benefits, the information slip would be made out in her name and she would then be required to report all of the income on her annual income tax returns thereafter.

There is also another income tax issue that you should consider, because of the direction to have your pension income cheques deposited in your spouse's account. The attribution rules in section 74.1 of the Income Tax Act, are such that any income (such as interest) earned in her account that is attributable to the deposits of your pension income, must be reported by you on your income tax return.

Any further questions concerning assistance that you may need in completing your 1999 income tax return, should be addressed to the Client Services Division in the Edmonton Tax Services office. We have forwarded a copy of this letter to our Edmonton office.

We hope that our comments are helpful.

Yours truly,

John Oulton
For Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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