28 July 1995 External T.I. 9516705 - MEANING OF PERIODIC 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Will lump sums paid in installments from
an FRA be treated as periodic payments

Position TAKEN: not generally

Reasons FOR POSITION prior opinions

XXXXXXXXXX 5-951670

July 28, 1995

Dear Sir:

Re: Meaning of the Term "Periodic Payments"

This is in reply to your letter of June 22, 1995, in which you request a technical Interpretation on the meaning of the phrase "part of a series of periodic payments" as used in paragraph 60.01(a) of the Income Tax Act (the "Act") as it relates to a specific situation.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2, available from your local Tax Services Office. Accordingly, since your enquiry deals with an actual proposal to transfer amounts from a U.S. based plan to an RRSP for a particular taxpayer, we can not provide you with a binding written confirmation of the tax implications. However, we can provide you with the following general comments which may or may not be applicable to the circumstances of your particular situation.

While the Department has not expressed an opinion on the phrase "part of a series of periodic payments" as used in paragraph 60.01(a) of the Act, we have stated in the past that, in general, a periodic payment is one of a series of at least three equivalent payments made under an arrangement that specifies the interval between payments. It is our opinion that this definition would also be applicable to paragraph 60.01(a) of the Act. We are also of the view that the payment of a lump sum in instalments would not generally constitute a series of periodic payments.

In your letter you noted that the U.S. Internal Revenue Code may apply an excise tax on excess withdrawals from a 401(k) plan or an IRA, that is not an income or profits tax and will, therefore, not be a "non-business-income tax" as defined in paragraph 126(7) of the Act. You should also be aware that the U.S. Internal Revenue Code may also apply an early withdrawal tax on withdrawals from an IRA or 401(k) plan if the beneficiary of the plan has not met certain age or income requirements. This additional tax is also not an income or profits tax for the purpose of calculating any foreign tax credits.

We trust that the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch