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: Can a group annuity contract satisfy 4900(3) of the Regulations?
Position: Yes.
Reasons: The contract satisfies the provision.
XXXXXXXXXX 2000-005615
M. P. Sarazin, CA
Attention: XXXXXXXXXX
January 19, 2001
Dear Sirs:
Re: Group Annuity Contract held by Deferred Profit Sharing Plan
This is in reply to your letter of November 14, 2000, requesting our views regarding the application of subsection 4900(3) of the Income Tax Regulations (the "Regulations").
Under subsection 4900(3) of the Regulations, a contract with a licensed annuities provider for an annuity payable to an employee who is a beneficiary under a deferred profit sharing plan beginning not later than the end of the year in which the employee attains 69 years of age, the guaranteed term of which, if any, does not exceed 15 years is prescribed as a qualified investment for a trust governed by such a plan or revoked plan.
You are of the view that it is entirely reasonable to conclude that subsection 4900(3) of the Regulations applies to group annuity contracts. In fact, it is your understanding that it is common practice in the Canadian insurance industry to issue group annuity policies to deferred profit sharing plan ("DPSP") trusts to be held as its sole investment. If we conclude that subsection 4900(3) does not apply to group annuity contracts, many DPSP trusts will be subjected to the penalty tax for the acquisition of non-qualified investments under Part X of the Income Tax Act.
You are seeking confirmation that a group annuity contract would be a qualified investment for a DPSP under subsection 4900(3) of the Regulations.
Based on our review of subsection 4900(3) of the Regulations and the Technical Notes issued by the Department of Finance in respect of subsection 4900(3) of the Regulations, we see no reason for specifically excluding group annuity contracts. Consequently, we are of the view that a group annuity contract could be a qualified investment for a DPSP under subsection 4900(3) of the Regulations.
Although we trust our comments are of assistance to you, we would advise that they do not constitute an advance income tax ruling and are, therefore, not binding on the Agency with respect to any particular situation.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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