https://decisia.lexum.com/tcc-cci/decisions/en/item/309944/index.do
Owen v. The Queen (May 9, 2018 – 2018 TCC 90, Jorré D.J.).
Précis: The taxpayer’s father, since deceased, was an American citizen. He had an individual retirement account (“IRA”). On his death a share of that IRA was transferred to a new IRA for the benefit of the taxpayer. CRA added that share to the taxpayer’s income, and allowed him tax credit for the American tax he had paid on the transfer. The taxpayer took the position that the amount was a non-taxable inheritance and appealed to the Tax Court. The Tax Court dismissed his appeal holding that the amount was specifically taxed under clause 56(1)(a)(i)(C.1) of the Income Tax Act (the “Act”). There was no order as to costs since this was an informal procedure appeal as a “foreign retirement arrangement”.
Decision: The facts were simple:
[2] [The taxpayer’s] father resided in the United States of America and passed away in 2011. Among other assets his father had a U.S. individual retirement account or IRA. The Appellant and his siblings were the beneficiaries of the IRA.
[3] The Appellant’s share was rolled over to an IRA in his name and the funds were distributed to him in 2012. When the funds were distributed, amounts were withheld for United States income taxes.
[4] The issue is whether the payment from the IRA should be included in his 2012 income.
The Tax Court accepted the position of CRA that such amounts were specifically dealt with by clause 56(1)(a)(i)(C.1) of the Act as a “foreign retirement arrangement”:
[13] The payment from the IRA to the Appellant is clearly a “payment out of” a “foreign retirement arrangement” within the meaning of clause 56(1)(a)(i)(C.1).
[14] The amount distributed to the Appellant was not an amount that would not be subject to income tax in the United States if the Appellant had been a resident of the United States.
[15] As a result the distribution must be included in the income pursuant to subsection 56(1).
[16] The result of this legislation is to treat the IRA distribution in much the same way as if it were a distribution from an RRSP of his father. However, because U.S. tax was withheld the Appellant benefited from a foreign tax credit.
[Footnote omitted]
Thus the appeal was dismissed; there was no order as to costs since this was an informal procedure appeal.