CRA indicates that a s. 104(27) designation cannot be made for a pension amount received after a trust ceased to be a GRE

CRA stated that where an estate receives a lump sum from a pension plan of the deceased beyond the 36-month period in which it could qualify as a graduated rate estate (“GRE”), CRA would have no discretion to extend the 36-month period.

If the executor is unable to distribute the income under s. 56(1)(a)(i) to the sole beneficiary before the end of the year of receipt, that income could be included in the sole beneficiary’s income under ss. 104(13) and (24) if the beneficiary was entitled to enforce payment of the lump-sum benefit. This income would be treated as property income rather than pension income in the beneficiary’s hands because the trust could only designate under s. 104(27) a pension benefit as pension income of its beneficiary if the benefit was received while it was still a GRE.

Neal Armstrong. Summaries of 15 June 2021 STEP Roundtable, Q.14 under s. 248(1) – GRE, s. 104(24) and s. 104(27).