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:
Can a person borrow on a stream of payments from a structured settlement and direct the issuer to deposit in a specific account that is owned by the claimant?
Position TAKEN:
Question of fact
Reasons FOR POSITION TAKEN:
Would require review of all pertinent documents and agreements.
XXXXXXXXXX 2001-011150
C. Tremblay, CMA
December 11, 2001
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
In her letter of November 8, 2001, and further to a telephone conversation (XXXXXXXXXX/Tremblay) of November 26, 2001, XXXXXXXXXX has asked us to write to you with regards to establishing a direction (she mentioned a codicil that would direct her annuity payments to a specific bank account) on a structured settlement. She seeks to have her monthly structured settlement annuity payments irrevocably directed to her bank account in order to give the bank some sort of security for a proposed loan.
Written confirmations of tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R4, Advance Income Tax Rulings, dated January 29, 2001. However, we are prepared to provide the following comments.
In order for the amounts paid from a structured settlement to remain free from tax in the claimant's hands, the casualty insurer, which owns the annuity contract (annuitant and beneficiary), is required to comply with the provision that the annuity contract not be assigned, commuted or transferred. At the inception of the structured settlement, the casualty insurer is required to make an irrevocable direction to the issuer of the annuity contract to make all payments directly to the claimant.
Whether or not a document that amends an annuity contract will result in the annuity contract being assigned, commuted or transferred is a question of fact that can only be determined upon a review of all the relevant documents and agreements.
We trust the above comments are of assistance.
Yours truly,
Steve Tevlin
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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