24 October 2001 External T.I. 2001-0103785 - PENSION TAX CREDIT

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Will a payment from an RRSP or RRIF received by a taxpayer under the age of 65 that is not as a consequence of the death of the taxpayer's spouse or CLP qualify for the pension credit under subsection 118(3) of the Act?

Position: No.

Reasons:

Payments from an RRSP or RRIF are not payments in respect of a life annuity out of or under a superannuation or pension plan.

XXXXXXXXXX 2001-010378
P. Kohnen
October 24, 2001

Dear XXXXXXXXXX:

Re: Pension Tax Credit

This is in reply to your letter of September 10, 2001, requesting our views regarding the eligibility of payments from a LIRA for the Pension Credit.

It is generally not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we are prepared to offer the following general comments, which may be of assistance.

Our Comments:

The terms Locked-in Retirement Account ("LIRA") and Life Income Fund ("LIF") are not defined in the Income Tax Act (the "Act"). However, our understanding is that they are generally registered as a Registered Retirement Savings Plan ("RRSP") and a Registered Retirement Income Fund ("RRIF"), respectively, that have additional conditions imposed under provincial or federal legislation.

Subsection 118(3) of the Act allows a taxpayer to claim a pension credit in respect of certain pension income received in the year to a maximum of $1,000 or the amount received (whichever is less). Where the taxpayer has not attained age 65 by the end of the calendar year, the pension credit may only be claimed if the pension income received is "qualified pension income", as defined in subsection 118(7) of the Act. This is noted in paragraph 7 of Interpretation Bulletin IT-517R, as referred to in your letter.

If the amount is not received in the year as a consequence of the death of the taxpayer's spouse or common-law partner, it will be "qualified pension income" only if it is a payment received in respect of a life annuity out of or under a superannuation or pension plan. Payments out of an RRSP or a RRIF are not payments in respect of a life annuity out of or under a superannuation or pension plan, and are not "qualified pension income".

Accordingly, where a taxpayer is under the age of 65 and is not receiving an amount from an RRSP or RRIF as a consequence of the death of their spouse or common-law partner, any amount received from an RRSP or RRIF will not qualify for the pension credit claim.

We trust that the above comments are of assistance. Please do not hesitate to contact Phillip Kohnen at (613) 957-2093 should you require further information.

Yours truly,

Roberta Albert, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate