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Principal Issues: [TaxInterpretations translation] Do paragraphs 81(1)(d) or (i) apply to a pension received under the Royal Canadian Mounted Police Superannuation Act?
Position: General comments provided.
Reasons: In this case, it is clear that paragraph 81(1)(d) does not apply. With respect to paragraph 81(1)(i), in order for that provision to apply, the pension must be received pursuant to section 32 or 33 of the Royal Canadian Mounted Police Superannuation Act.
Marie-Claude Hébert
XXXXXXXXXX Advocate
2008-028634
August 13, 2008
Re: Tax Treatment of a Disability Pension Received from the Royal Canadian Mounted Police ("RCMP")
Dear Sir,
This is further to your letter of July 8, 2008 requesting our opinion as to the tax treatment of the disability pension you will receive pursuant to the Royal Canadian Mounted Police Superannuation Act ("RCMPSA").
More specifically, you wish to know whether paragraph 81(1)(d) or (i) of the Income Tax Act (the "Act") can apply to your pension.
Unless otherwise indicated, all legislative references herein are to the provisions of the Act.
Our Comments
The situation you have indicated in your letter appears to be related to an actual situation concerning a specific taxpayer. As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is our practice not to provide written opinions on proposed transactions otherwise than by way of advance income tax rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you.
In your documents, you raised the possibility that paragraph 81(1)(d) may apply to a pension received under the RCMPSA. Under paragraph 10 of Interpretation Bulletin IT-397R (copy attached), the tax-exempt payments under this paragraph are as follows:
(a) compensation payable under the Pension Act for injury or disease resulting in the disability or death of any member of the naval, military, or air forces of Canada in respect of service in those forces;
(b) compensation payable under the Civilian War Pensions and Allowances Act, for the same reasons referred to in (a) above, in respect of service rendered by any person in World War II who held certain positions (for more details see the list in the Bulletin);
(c) allowances payable under the War Veterans Allowance Act to certain veterans and their widows, widowers, and orphan children.an allowance payable under the War Veterans Allowance Act to certain veterans, their widows, widowers and orphans;
(d) Compensation payable under regulations made under section 9 of the Aeronautics Act.
We are therefore of the view that a pension received under the RCMPSA does not fall within paragraph 81(1)(d).
As for paragraph 81(1)(i), it exempts from tax any pension or compensation received solely by virtue of section 32 or 33 of the RCMPSA (former section 27 of the RCMPSA) in respect of an injury, disability or death. We have included a copy of those sections for your information. Based on the documents you have provided, it is difficult to determine whether you are receiving your pension by virtue of sections 32 or 33 of the RCMPSA or whether you are receiving it by virtue of subsection 11(2) of the RCMPSA (formerly subsection 10(2) of the RCMPSA), the latter not being tax-exempt.
We recommend that you obtain additional information on the nature of your pension so that you can, in conjunction with your Tax Services Office, make any necessary changes to your tax returns.
These opinions do not constitute advance rulings and, as stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, are not binding on us.
Best regards,
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.
Encl.
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