Section 254

See Also

Abrahamson v. MNR, 91 DTC 213 (TCC)

After stating (p. 221) that "where a pension plan provides for the pension benefits to be paid in the form of an annuity all payments received under the annuity are treated as if they came out of the pension plan" Rip TCJ went on to find that payments to the resident taxpayer out of an IRA, which had been funded out of a return of contributions he had made to a U.S. pension plan, were not deemed to be superannuation or pension benefits under s. 254(a):

"I cannot find the IRA was entered into purporting to create, to establish, to extinguish or to be in substitution for a taxpayer's right to an amount out of the [pension] plan." (p. 221)

Administrative Policy

27 January 1994 T.I. 933668 HAA7284-1 (C.T.O. "Pension Plan Wind-up")

Where a registered pension plan is revoked or deregistered and the pension plan funds are used to purchase life annuities for each of the intended beneficiaries of the registered plan, s. 254 will apply.

Subsection 254(4)

Cases

Water's Edge Village Estates (Phase II) Ltd. v. Canada, 2002 DTC 7172, 2002 FCA 291

In December 1991 the taxpayers (who were Canadian residents) acquired most of the partnership interests in a U.S. partnership ("Klink") that had been formed approximately 12 years earlier and whose principal asset, in December 1991, was an IBM mainframe computer which originally had cost U.S.$3.7 million but which had a current fair market value of $5,000. Klink then transferred the computer to a recently-formed British Columbia limited partnership in consideration for a partnership interest therein.

Noël J.A. found that although the allocation by Klink of losses to the taxpayers based on the original historical cost of the computer to Klink accorded with the clear words on the statute, this result (p. 7179):

"Is contrary to the scheme of the capital cost allowance provisions which limits the deduction of capital expenditures to those incurred for the purpose of earning income under the Act."

Accordingly, the taxpayers had misused the particular provisions giving this result (in particular paragraph 13(21)(f) and subsection 20(16)), and had abused the capital cost allowance system generally.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A cost means original cost 174
Tax Topics - Income Tax Act - Section 96 exploiting modest business asset was sufficient partnership activity 221
Tax Topics - Statutory Interpretation - Resolving Ambiguity 171
Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 45(3) prompt amendment evidenced intent to end anomaly 82