26 June 1997 External T.I. 9715765 - MINIMUM TAX ON LUMP SUM PENSION PAYMENT

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:

Whether a lump sum commutation payment out of a foreign unregistered pension plan which is brought into income under 56(1)(a)(i) and deducted under 60(j) is subject to minimum tax.

Position: No.

Reasons:

Where it is paid to member upon his withdrawal from the plan it is excepted from minimum tax by 127.52(1)(a)(ii)(B)(I) reduction to adjusted taxable income.

XXXXXXXXXX 971576

June 26, 1997

Dear XXXXXXXXXX:

Re: Lump Sum from Non-Registered Foreign Pension Plan

This is in reply to your letter of June 5, 1997, in which you ask us to confirm whether adjustable taxable income as calculated under subsection 127.52(1) of the Income Tax Act (the "Act") includes a lump sum commutation payment from the above-noted plan. Adjustable taxable income is an amount used in determining whether an individual is liable for the minimum tax imposed by section 127.5 of the Act.

We confirm that an amount which is deductible under paragraph 60(j) of the Act in a taxation year is included in adjustable taxable income unless it is one of several amounts described in clause 127.52(1)(a)(ii)(B) of the Act. One of these amounts is a payment which meets all of the following conditions:

a single amount out of or under a superannuation or pension fund or plan (including a foreign unregistered pension plan),

received by an individual in the taxation year and brought into income pursuant to subparagraph 56(1)(a)(i) of the Act, and

represents an amount received as a consequence of the individual's withdrawal from the fund or plan.

We trust our comments will be of assistance to you.

Yours truly,

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