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:
We have been asked to be of assistance with respect to the commutation of an annuity contract issued in connection with a structured settlement arrangement and the payment of the related lump sum to the claimant. Apparently, the individual's mother and legal guardian is in financial difficulty.
Position:
We are unable to be of assistance.
Reasons:
One of the requirements of a structured settlement arrangement is that the related annuity contract be non-commutable.
20001-011380
XXXXXXXXXX C. Tremblay, CMA
957-2139
December 19, 2001
Dear XXXXXXXXXX:
Re: Structured Settlements
This is in reply to your telephone enquiries of November 28, and December 6, 2001 (XXXXXXXXXX/Tremblay) and further to a facsimile sent to us by XXXXXXXXXX on December 3, 2001, concerning the above subject.
The information we received indicates that as a result of a personal injury, XXXXXXXXXX, will be entitled to receive periodic payments when she is XXXXXXXXXX years of age under a structured settlement arrangement. As a result of your financial circumstances, you have asked us whether a portion of the payments in respect of the annuity contract in connection with the structured settlement, could be commuted by the owner (insurer) and the related lump sum amounts paid to you.
A structured settlement is generally described in paragraph 5 of Interpretation Bulletin IT-365R2 Damages, Settlement, and Similar Receipts. Payments made to the claimant under a structured settlement arrangement are in the nature of non-taxable damages. However, for payments to be treated in that manner, one of the requirements is that the related annuity contract be non-commutable. As a consequence of this requirement, we are unable to be of assistance with respect of your request that the owner of the annuity contract be permitted to commute a portion of the annuity payments and pay the proceeds to you.
We regret that we could not give you a favourable reply.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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