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: Changes to Ruling 2010-038251.
Position: Ruling modified.
Reasons: Change in facts does not affect the validity of the ruling given.
XXXXXXXXXX
2012-043794
XXXXXXXXXX
XXXXXXXXXX, 2012
Dear XXXXXXXXXX:
Re: Supplemental Advance Income Tax Ruling
Structured Settlement
XXXXXXXXXX (the "Plaintiff")
We are replying to your letter of XXXXXXXXXX, wherein you requested amendments to advance income tax ruling (2010-038251) (the "Original Ruling") which was issued on XXXXXXXXXX.
Updated Facts
1. The facts are as set out in paragraph 1-6, and 10-11 of the Original Ruling.
2. With respect to paragraphs 7, 8, and 9 of the Original Ruling: In accordance with an Assignment and Assumption Agreement, the Insurer wishes to assign to XXXXXXXXXX (the "Assignee Insurer") all of the Insurer's liability with respect to that portion of the Settlement Agreement intended to be satisfied by the periodic payments. Therefore it is the Assignee Insurer who has the obligation to make the payments in paragraph 7 of the Original Ruling, the Assignee Insurer who proposes to fund its obligation to make Structures Payments in paragraph 8 of the Original Ruling, and the Assignee Insurer who is the owner and annuitant (beneficiary) in paragraph 9 of the Original Ruling.
Proposed Amendments
1. The following new paragraph is added above paragraph 7 of the Original Ruling: In accordance with an Assignment and Assumption Agreement, the Insurer wishes to assign to XXXXXXXXXX (the "Assignee Insurer") all of the Insurer's liability with respect to that portion of the Settlement Agreement intended to be satisfied by the periodic payments. The Assignee Insurer wishes to assume from the Insurer all of the assigned liability. The Plaintiff has agreed to consent to the said assignment and assumption.
2. Paragraph 7 of the Original Ruling should be amended to read: The obligation to make the payments referred to in 6 above (the "Structured Payments") will be met by the Assignee Insurer. In consideration of the Assignee Insurer making the Structured Payments, the Plaintiff settles the Statement of Claim against the Defendant. The Assignee Insurer will not, however, be released and discharged from making the Structured Payments, and each payment made by the Annuity Issuer shall to the extent thereof and only to that extent, operate as a pro tanto release and discharge of the Assignee Insurer's obligation to make the Structured Payments.
3. Paragraph 8 of the original Ruling should be amended to read: In accordance with the Assignment and Assumption Agreement, the Insurer proposes to assign funds on deposit with XXXXXXXXXX (the "Annuity Issuer") in the amount of $XXXXXXXXXX to the Assignee Insurer which funds shall be applied to fund the Assignee Insurer's obligation to make the Structured Payments. The Assignee Insurer shall then fund its obligation to make the Structured Payments by the purchase of single premium annuity contract issued by the "Annuity Issuer". The annuity contract will be non-commutable, non-assignable and non-transferable.
4. Paragraph 9 of the Original Ruling should be amended to read: The owner and annuitant (beneficiary) under the contract will be the Assignee Insurer; however, an irrevocable direction will be executed in respect of the annuity contract directing the Annuity Issuer to make such payments directly to the Plaintiff or to the Estate of the Plaintiff, as the case may be.
Purpose of the Proposed Amendments
5. The purpose of the proposed amendments is to allow for an assignment of ownership and residual liability of the structure from the Insurer to the Assignee Insurer.
Confirmation
Provided that the preceding statements and the statements contained in the Original Ruling constitute a complete and accurate disclosure of all the relevant facts, transactions, and purposes of the Proposed Transactions, notwithstanding the amendments described herein and the preceding statements, we hereby confirm that, subject to the conditions, limitations, qualifications and comments set out in the Ruling, the Original Ruling, as modified by this letter, will continue to be binding on the Canada Revenue Agency.
Yours truly,
XXXXXXXXXX
For Director
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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