29 January 1997 External T.I. 9701045 - RPP LUMP SUM 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:

When must a lump sum payment be included in income when it is paid in satisfaction of prior understated benefits.

Position:

In the year it is received

Reasons:

No other provisions provide for averaging or deferal

XXXXXXXXXX 970104

January 29, 1997

Dear XXXXXXXXXX:

Re: Superannuation Benefits

This is in reply to your letter received January 13, 1997, in which you ask if you can spread the tax payable on a large pension payment over several years.

As we understand the situation, the administrators of the pension plan to which you belong recently determined that they miscalculated the pension that was payable to you and a number of other individuals over a number of years. They have recalculated the amount due and have decided to pay the difference in a lump sum. However, you believe the payments will be large enough to result in an onerous tax burden on many pensioners.

On the basis of the information provided, we must regretfully advise that under the Income Tax Act, as presently worded, you are required to report all amounts received out of a pension plan in the year they are received. There is no provision for averaging the income or spreading the tax over a number of years.

We trust this information will be of assistance to you.

Yours truly,

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