Cases
1398874 Ontario Inc. v. The Queen, 2010 DTC 5030 [at 6634], 2010 FCA 14
The taxpayer was incorporated by a retiring police officer to set up an individual pension plan, into which he transferred the commuted value of his pension from OMERS. In dismissing the taxpayer's appeal of the Minister's notice of intent to revoke the individual pensions plan, the Court concluded that the Minister had been correct in determining that the purpose of the taxpayer in establishing the plan was to shelter the commuted value of his OMERS pension and to withdraw surplus (which, in fact, he did the day after he made the transfer into his new plan), rather than to provide periodic payments until death.
Administrative Policy
23 July 1992 Memorandum 7-921856 -
The controlling shareholders of corporations that collectively formed a partnership would be entitled to be members of a defined benefit plan established for the partnership given that those individuals also were employees of the partnership.
Paragraph 8502(a) - Primary Purpose
See Also
Ross v. The Queen, 2013 DTC 1250 [at 1400], 2013 TCC 333
In 2001, the first taxpayer transferred the commuted value of his entitlements under his registered pension plan with OMERS to a new pension plan established by a newly-incorporated corporation which was to employ him as its only employee in a start-up business. The new business was unsuccessful, and the taxpayer only received (at most) modest employment income before the business was discontinued.
The Minister revoked the new pension plan retroactively, and added the transferred amount to the taxpayer's income for 2001, on the basis that the primary purpose of the new plan was to shelter, under s. 147.3, the transfer out of the old plan rather than to generate periodic pension benefits in respect of the services of an employee, as required by Reg. 8502(a). Before going on to find that the Minister's reassessment of the taxpayer's 2001 year was statute-barred, Bocock J noted (at para. 42) that a qualifying pension plan was concerned with "primarily providing lifetime retirement benefits as defined in Regulations 8502 and 8504 (the 'Lifetime Benefit Purpose'), and then stated (at para. 44) that the existence of other purposes did not establish the absence of this primary purpose:
The Court is not satisfied that the presence of the purposes related to surplus benefit distribution and succession benefits have done so. The surplus benefit distribution is allowed at law and has occurred in many registered pension plans, including potentially the OMERS plan from which the commuted benefits were initially transferred. It cannot be suggested that such a distribution is supercedeous to the primary purpose, when the very calculation undertaken to determine whether a surplus distribution may be made is whether sufficient assets will remain to satisfy the Lifetime Benefits Purpose. Not dissimilarly, succession planning with respect to the assets is completely compatible with the Lifetime Benefit Purpose, since succession rights only become choate upon the pensioner's death, after which time the Lifetime Benefit Purpose has logically expired.]
Paragraph 8502(c) - Permissible Benefits
Administrative Policy
26 April 1994 Memorandum 7-940948
Prizes paid to beneficiaries in order to induce them to purchase past service represent distributions described in Regulation 8502(d) and benefits that do not comply with Regulation 8502(c).