After noting that it is CRA’s policy to consider that a settlement payment made to an RRSP or RRIF respecting an actionable loss suffered by it will not be treated as a contribution to the plan, nor as such a contribution or a taxable benefit to the annuitant if the damages are paid to the annuitant but are paid over to the plan by the later of the year end and six months after receipt, the Directorate confirmed that there also will be no adverse tax consequences where a settlement payment is made to a an RDSP, or indirectly by the beneficiary returning the payment to the plan within the timeframe applicable to the RRSP policy (it will not be treated as a contribution).
If the payment is received and retained by the beneficiary of the plan, the payment would be a disability assistance payment (DAP) and would be included in the beneficiary’s income under s. 146.4(6). If the settlement payment is made to an RDSP holder who is not the beneficiary, the payment would be a registered plan strip (as defined in s. 207.01(1)) and therefore an advantage under para. (d) of the advantage definition (because the exclusion from the registered plan strip definition for TFSAs and for amounts included in income would be inapplicable).
|Locations of other summaries||Wordcount|
|Tax Topics - Income Tax Act - Section 146 - Subsection 146(8)||damages payment received by annuitant is not a benefit if paid over to the RRSP by year end||253|
|Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Unused TFSA Contribution Room - Paragraph (b) - Element D||damages payments made to a TFSA are not treated as a contribution||143|
|Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Registered Plan Strip||advantage if RDSP damages are received by a holder who is not a beneficiary||220|
|Tax Topics - Income Tax Act - Section 146.1 - Subsection 146.1(7.1)||RESP damages received and retained by the subscriber would be included under s. 146.1(7.1)||174|