17 August 1999 Internal T.I. 9921347 - CHARITY BENEFICIARY OF PENSION

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: Return of Pension Contributions Upon Death

- Registered Charity is Beneficiary - Should tax have been withheld on T4A?

Position: Yes

Reasons: Wording of ITA 56(1)(a) & 153(1)(b)

August 20, 1999

	Ottawa TSOffice	Headquarters
	8th Floor	S.E. Thomson
	957-8953

Attention: Jo-Ann Bruton, Trust Exams

992134

Registered Charity as Beneficiary of Return of Pension Contributions

This is in reply to your memo on July 23, 19>99 in which you ask if tax should have been withheld from a lump-sum pension payment to the XXXXXXXXXX a registered charity.

We understand the facts to be as follows:

xxxxxxxxxx

We presume that XXXXXXXXXX was the named beneficiary under the terms of the pension plan; that is, the donation was not made under XXXXXXXXXX will.

If this assumption is correct, then XXXXXXXXXX has correctly issued the T4A in the name of the charity, and has correctly withheld 30%. Per subparagraph 56(1) (a) of the Income Tax Act (the "Act"), a pension or superannuation benefit is taxable to the recipient in the year of receipt. The payment is subject to withholding of 30% by virtue of subparagraph 153(1)(b) of the Act, and subparagraph 103(4)(c)(vi) of the Income Tax Regulations.

Xxxxxxxxxx

Please note that the income is taxable to the beneficiary, not the deceased, as outlined above. Further, if the charity was the named beneficiary under the plan, it is the charity, not the deceased's estate that reports the income. In this regard, neither the deceased, nor the estate will be entitled to a charitable gift tax credit.

As stated, your goal is to determine a mechanism for XXXXXXXXXX to obtain a refund of the 30% tax withheld. We know of no such mechanism in the legislation - although, if the charity is a corporation, we see nothing to prevent it from filing a T2 Corporation Income Tax Return to obtain a refund of taxes withheld.

We trust the above will provide some assistance in the resolution of this matter.

P. Spice
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate