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.
THE CONFERENCE FOR ADVANCED LIFE UNDERWRITING1993 Annual Conference
Question 6
Charitable Annuities:
(a) If a person donates funds to a charity in return for a life income, will the provisions of Interpretation Bulletin IT-111R apply if the charity purchases a life annuity from an insurer to back up its obligation to the donor (assume the charity is owner, payee and beneficiary of the life annuity, and the donor is the annuitant).
(b) Would the answer to (a) above change if the charity made an irrevocable direction to the insurer to have the payments under the life annuity made directly to the donor, but the charity remained owner and beneficiary of the annuity.
Response
This position resulted from the fact that certain charities have issued annuities for many years and that the purchasers of such annuities frequently pay much more for the annuity than would be reasonable in an ordinary commercial transaction. For purposes of the position in Interpretation Bulletin IT-111R, providing a donor makes an irrevocable contribution directly to a registered charity in return for a life annuity, it does not matter what steps the charity may take to fund its liability under the annuity. The charity may issue the annuity in its own name or it may purchase an annuity from a recognized annuity issuer, either in the name of the donor or in its own name with a direction to pay in favour of the donor. The amount of the gift to the registered charity will, in accordance with paragraph 3 of IT-111R, equal the amount, if any, by which the amount of the payment to the charity exceeds the total of the annuity payments expected to be received by the donor pursuant to the life expectancy tables provided in IT-111R.
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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