Her Majesty the Queen v. Irene M Cumming, [1976] CTC 447, 76 DTC 6265

Mahoney, J:—The issue is whether a death benefit under the Canada Pension Plan Act, RSC 1970, c C-5, is a death benefit as defined by the Income Tax Act, SC 1970-71-72, c 63. The former Act provides:

44, (1) Subject to this Part,

(c) a death benefit shall be paid to the estate of a deceased contributor who has made contributions for not less than the minimum qualifying period;

55. (1) A death benefit payable to the estate of a contributor is a lump sum amount equal to

(a) 6 times the amount of the contributor’s retirement pension . . . or

(b) 10% of the Year’s Maximum Pensionable Earnings for the year in which the contributor died,

whichever is the lesser.

72. (1) An application for a death benefit may be made on behalf of the estate of a contributor by the executor, administrator, heir or other legal representative having the ownership or control of property comprised in the estate, or by any other person to whom the benefit would, if the application were approved, be payable under this Part.

(2) Where payment of a death benefit is approved, the amount thereof shall be paid to the estate of the contributor in a lump sum or, if less than such amount as may be prescribed to such person or persons and in such manner as may be prescribed.

Earl F Cumming was a contributor to the Canada Pension Plan (hereinafter called “CPP”). He had worked for the same employer for over 25 years prior to his death in 1973. He left a will naming his wife, the defendant, soie executrix and heir if she survived him for 30 days. She survived; the will was not probated. She applied for the CPP death benefit on behalf of the estate and a cheque for $560 payable to “The Estate of Earl F Cumming” was delivered to her in payment thereof. She endorsed the cheque personally, without reference in the endorsement to the estate or to her capacity as executrix, and deposited the proceeds in her own bank account. The $560 was not, of course, reported as income in the personal return filed for Earl F Cumming for the portion of 1973 he lived. No return was ever filed for the estate as such.

In her own personal return for 1973 the defendant reported the $560 as income and claimed an offsetting deduction. The Income Tax Act provides:

56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,

(a) any amount received in the year as, on account or in lieu of payment of, or in satisfaction of,

(i) a superannuation or pension benefit, including, without limiting the generality of the foregoing,

(B) the amount of any benefit under the Canada Pension Plan . . .

(iii) a death benefit,

248. (1) In this Act,

“death benefit” for a taxation year means the amount or amounts received

in the year by any person upon or after the death of an employee in recognition of his service in an office or employment minus

(a) where the amount or amounts were received by his widow, the lesser of

(i) the amount or amounts so received, and

(ii)

Subparagraph (ii) provides for a variety of situations however it is undisputed that the $560 received was the lesser amount whatever calculations might have pertained under subparagraph (ii).

The payment was to the estate not to the defendant. I do not, however, accept the plaintiff's argument that the Income Tax Act demands such a strict interpretation of the expression “received by his widow” that a payment otherwise a death benefit for the purposes of the Act, destined in fact and in law to the widow, would lose its character simply because it passed through the estate en route to her. The $560 paid by the CPP was “received” by the widow within the meaning of paragraph (a) [in the definition of “death benefit”] of subsection 248(1).

To be a death benefit under the Income Tax Act the payment must, inter alia, have been in recognition of the deceased’s service in an office or employment. The ordinary meaning of the word “recognition” in the phrase “in recognition of” is

The acknowledgement or admission of a kindness, service, obligation or merit, or the expression of this in some way.* [1]

acknowledgement of something done or given esp. by making some return <a gift in — of a service>t [2]

The defendant is correct in stating that the Act does not link the payer directly with the employment, but it does link the payment with a recognition of service in that employment. It is true that the deceased was a contributor to CPP because he was employed; it is equally true that the CPP death benefit became payable because he was a contributor but to say that it was paid “in recognition of his service in employment” is to do considerable violence to the idea plainly conveyed by those ordinary English words .

The death benefit payable under the Canada Pension Plan Act is not a “death benefit” within the meaning of subsection 248(1) of the Income Tax Act. It is, however, a benefit under the Canada Pension Plan and is specifically required to be included in its recipient’s income by clause 56(1)(a)(i)(B).

This is a case in which, regardless of the outcome, the defendant is entitled, by subsection 178(2), to an order that she be paid “all reasonable and proper costs”. I am by no means satisfied that an award of taxable costs would, in this case, satisfy that requirement but understand that some agreement may be reached by the parties. The defendant will have leave to apply for a further order as to costs if no agreement is reached.

The appeal is allowed with costs.