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: We have been asked to be of assistance with respect to the commutation of an annuity contract issued in connection with a structured settlement arrangement and the payment of the related lump sum to the claimant.
Position: We are unable to be of assistance.
Reasons: One of the requirements of a structured settlement arrangement is the related annuity contract be non-commutable.
980621
XXXXXXXXXX M. Eisner
(613) 957-2138
March 23, 1998DearXXXXXXXXXX :
Re: Structured Settlements
This is in reply to your letter of March 19, 1998, concerning the above subject.
You have indicated that as a result of an accident in 1993, you have been receiving periodic payments under a structured settlement arrangement, which is generally described in paragraph 5 of Interpretation Bulletin IT-365R2 “Damages, Settlement, and Similar Receipts.” You have submitted some of the documentation in that regard.
As a result of your financial circumstances, you have asked us whether the remaining payments in respect of the two annuity contracts issued in connection with the structured settlement, could be commuted by the owner (insurer) and the two related lump sum amounts paid to you.
Payments made to the claimant under a structured settlement arrangement are in the nature of non-taxable damages. However, for payments to be treated in that manner, one of the requirements is that the related annuity contracts must be non-commutable. As a consequence of this requirement, we are unable to be of assistance with respect of your request that the owner of the two annuity contracts be permitted to commute the remaining annuity payments and pay the proceeds to you.
If you have any further questions on this issue, please do not hesitate to contact Mr. Marv Eisner at the above telephone number.
We regret that we could not give you a favourable reply.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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