18 March 2009 External T.I. 2007-0257001E5 - pension split of spousal RRIF payments

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.

Principal Issues: Can amounts received by an annuitant out of a spousal RRIF that are subject to the attribution rules be included as eligible pension income under subsection 118(7) of the Act?

Position: No

Reasons: While the amounts are included in the income of the spouse, the amounts are not received by the spouse for purposes of section 60.03 of the Act.

			2007-025700
XXXXXXXXXX 	W. C. Harding
			613-957-8953
March 18, 2009

Dear XXXXXXXXXX :

Re: Eligible Pension Income

This is in reply to your letter of October 25, 2007, in which you asked if an amount included in an individual's income for a year under the attribution rules described in subsection 146.3(5.1) of the Income Tax Act (the "Act") would be "eligible pension income" of the individual as defined in subsection 118(7) of the Act such that:

(a) the individual would be eligible for the pension credit under subsection 118(3) of the Act in respect of the amount, and

(b) would be eligible to split the amount with the individual's spouse under section 60.03 of the Act.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate 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 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature and are not binding on the Canada Revenue Agency (CRA). All publications referred to herein can be accessed on the CRA website at the following address:

http://www.cra-arc.gc.ca/tax/technical/incometax/menu-e.html.

A "spousal or common law partner plan" is an RRSP to which a taxpayer has made a contribution when the contributor's spouse or common law partner was the annuitant, or an RRSP or a RRIF that has received amounts from an RRSP or RRIF that was a spousal or common law partner RRSP or RRIF.

In general, subsection 146.3(5) of the Act requires the annuitant of a RRIF to include all of the amounts received out of the RRIF in their income. However, pursuant to paragraph 146.3(5.1) of the Act, if the RRIF is a spousal or common law partner RRIF then, subject to certain exceptions, the contributor must also include in his or her income an amount equal to the lesser of:

(a) the premiums made by the contributor to any spousal or common law partner plan in the year or in one of the two immediately preceding years; and

(b) the total of all amounts included in the annuitant's income in respect to the spousal or common law partner RRIF to the extent the total exceeds the minimum amount required to be withdrawn from the plan for the year.

Paragraph 146.3(5.4)(b) of the Act then provides the annuitant of the RRIF with a deduction for the amount included in the contributing spouse's income.

Subsection 118(7) of the Act defines "eligible pension income" received by an individual in a taxation year and includes, if the individual has attained the age of 65 years before the end of the taxation year, any pension income received by the individual in the year out of or under a registered retirement income fund or under an "amended fund" as referred to in subsection 146.3(11) of the Act. While subsection 146.3(5.1) of the Act operates to include an amount in a contributing spouse's income, the amount is not a payment out of or under a RRIF that is received by the contributor. Accordingly, this amount cannot be included in the contributor's pension income and is therefore not eligible for the pension credit under subsection 118(3) of the Act or the pension split under section 60.03 of the Act.

Paragraph 118(8)(d) of the Act also provides that for the purposes of subsection 118(7) of the Act, pension income and qualified pension income received in a year by a taxpayer does not include the amount, if any, by which:

(a) an amount required to be included in computing the individual's income for the year

exceeds

(b) the amount, if any, by which the amount referred to in (a) exceeds the total of all amounts deducted (other than under paragraph 60(c)) by the individual for the year in respect of that amount;

Accordingly, the annuitant of a RRIF, in the situation described above, would also be precluded from receiving a pension credit with respect to the amount included in the contributing spouse's income and would be precluded from splitting the income with the spouse.

We trust that these comments will be of assistance to you.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch