28 September 1998 External T.I. 9824665 - CPP - DISABLED CONTRIBUTOR'S CHILD BENEFITS

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: The Child Support Team, Department of Justice, has enquired about the tax treatment of payments called “Disabled Contributor’s Child’s Benefits” from the Canada Pension Plan.

Position: DCCBs are taxed as income under clause 56(1)(a)(i)(B) of the Act in the hands of a child of the disabled contributor even though the DCCB may be paid to a person or agency having custody and control of the child.

Reasons: See file # 9624285, 922362, 970474. Also see paragraph 13 of IT-499R.

Lise Lafrenière Henrie
Senior Counsel
Co-ordinator, Legal Policy
Child Support Team 982466
Department of Justice G. Moore
284 Wellington Street
Ottawa, Ontario
K1A 0H8

Dear Ms Lafrenière Henrie:

Re: Disabled Contributor’s Child’s Benefits - Canada Pension Plan

I am replying to your letter of September 18, 1998, in which you requested our comments regarding the tax treatment of disabled contributor’s child’s benefits (DCCB) paid under the Canada Pension Plan.

It is your understanding that DCCBs are a taxable benefit to be treated as income in the hands of the recipient child and not in the hands of the parent, who sometimes actually receives the funds for the child.

Our Comments

Section 75 of the Canada Pension Plan generally provides that, when a child is under 18 years of age and a disabled contributor’s child’s benefit is payable to the child of a disabled contributor, actual payment is to be made to the person or agency having custody and control of the child. If there is no person having custody and control of the child, payment is to be made to the person or agency as directed by the Minister of Human Resources Canada. As a result, a child would rarely, if ever, receive a DCCB benefit directly.

DCCBs are income in the hands of the child of a disabled contributor in the year in which the payments are made, pursuant to clause 56(1)(a)(i)(B) of the Income Tax Act despite the fact that payment may be required to be made to the person or agency having custody and control of the child. These comments are consistent with the Department’s position stated in paragraph 13 of Interpretation Bulletin IT-499R, Superannuation or Pension Benefits, (copy enclosed) regarding the tax treatment of orphan’s benefits paid under section 75 of the Canada Pension Plan.

I trust our comments will be of assistance to you.

Yours truly,

J. Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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