7 December 1995 External T.I. 9530335 - PENSION WINDUP, MISSING MEMBERS, 153(1)

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Would payments into court on behalf of missing members on the wind-up of a pension plan be subject to withholding taxes?

Position: Yes

Reasons:

pension benefit for 153(1)(b) only requires that an amount is received.

953033
XXXXXXXXXX M.P. Sarazin

Attention: XXXXXXXXXX

December 7, 1995

Dear Sirs:

Re: Wind-up of a Pension Plan

This is in reply to your letter dated November 14, 1995 wherein you requested further comments in addition to the comments provided in our letter dated July 12, 1995 (file 951481) regarding the wind-up of a pension plan where the trustees have not been able to locate all of the members (beneficiaries) of the plan and whether monies paid into court on behalf of the missing members would be subject to withholding tax under subsection 153(1) of the Income Tax Act (the "Act"). The purpose of the payment into court is to enable the pension plan to be wound up under the applicable statutes and to discharge the plan trustees of all responsibilities in relation to the trust fund otherwise the remaining funds will be depleted in order to pay the administration costs which includes the ongoing actuarial valuations required by the Superintendent of Pensions.

Comments

It appears that the interpretation you seek relates to a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Customs, Excise and Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for the particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling should be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments in response to your letter.

In a situation where the pension statutes allow a pension plan to be wound up by the payment of the remaining pension funds into court and thereby discharges the trustees of the plan from any further obligations in relation to the pension plan, we are of the view that the payment into court would be subject to withholding taxes under paragraph 153(1)(b) of the Act. The payment would be considered a "superannuation or pension benefit" within the meaning assigned by subsection 248(1) of the Act.

We believe that the withholding taxes should be computed on the basis that a payment is being made on behalf of the missing member and in accordance with the provisions of subsection 103(4) of the Income Tax Regulations.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch