5 March 1987 Income Tax Severed Letter

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.

DATE March 5, 1987

TO/ Sudbury Taxation Centre     FROM/ Specialty Rulings Directorate
                                      A. Jane
                                      957-2126

ATTENTION S. Salewski
          Taxpayer Services Section

RE: XXXX Income Tax Return

This is in reply to your memorandum and attachments of November 21, 1986 inquiring as to whether or not the amount of a payment from a U.S. Individual Retirement Arrangement ("IRA") representing both income and capital to a Canadian resident should be included as pension income on the Canadian return.

                               XXXX

You inquire as to whether it is correct to include the entire amount received from the IRA as pension income on the Canadian return relying on Article 18 of the Canada-U.S. Income Tax Convention (1980) (the "Convention") and to delete therefrom the portion reported as interest.

We have generally taken the position that payments received out of an IRA by a resident of Canada are includable in income for tax purposes pursuant to paragraph 56(1)(a) of the Income Tax Act (the "Act"). It is our position that for purposes of the Convention, amounts received out of an IRA will be a payment from a retirement plan, and as such fall within Article 18 of the Convention. Assuming that the entire amount was taxable for U.S. tax purposes, the equivalent sum should be included in the Canadian return as other pensions or superannuation, and the portion reported as interest should be deleted therefrom. We point out that the taxpayer may be entitled to a foreign tax credit in respect of the U.S. tax paid on the amounts received from the IRA.

We enclose the taxpayer's returns herewith.

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch