Income Tax Regulations

304 (1) For the purposes of this Part and of subsections 12.2(1) and 20(20) and paragraph 148(2)(b) of the Act, prescribed annuity contract, for a taxation year, means

• (a) an annuity contract that is, or is issued pursuant to, an arrangement described in any of paragraphs 148(1)(a) to (b.4) and (d) of the Act;

• (b) an annuity contract described in paragraph 148(1)(c) or (e) of the Act; and

• (c) an annuity contract

  • (i) under which annuity payments have commenced in the taxation year or a preceding taxation year,

  • (ii) issued by any one of the following (referred to in this section as the “issuer”):

    • (A) a life insurance corporation,

    • (B) a registered charity,

    • (C) a corporation referred to in any of paragraphs (a) to (c) of the definition specified financial institution in subsection 248(1) of the Act,

    • (D) a corporation referred to in subparagraph (b)(ii) of the definition retirement savings plan in subsection 146(1) of the Act, and

    • (E) a corporation (other than a mutual fund corporation or a mortgage investment corporation) the principal business of which is the making of loans,

  • (iii) each holder of which

    • (A) is

      • (I) an individual other than a trust,

      • (II) a trust described in paragraph 104(4)(a) of the Act (in this paragraph referred to as a “specified trust”),

      • (III) a trust that is a qualified disability trust (as defined in subsection 122(3) of the Act) for the taxation year in which the annuity is issued, or

      • (IV) if the annuity is issued before 2016, a trust that is a testamentary trust at the time the annuity is issued,

    • (B) is an annuitant under the contract, and

    • (C) throughout the taxation year, dealt at arm’s length with the issuer,

  • (iv) the terms and conditions of which require that, from the time the contract meets the requirements of this paragraph,

    • (A) all payments made out of the contract be equal annuity payments made at regular intervals but not less frequently than annually, subject to the holder’s right to vary the frequency and quantum of payments to be made out of the contract in any taxation year without altering the present value at the beginning of the year of the total payments to be made in that year out of the contract,

    • (B) the annuity payments thereunder continue for a fixed term or

      • (I) if the holder is an individual (other than a trust), for the life of the first holder or until the day of the later of the death of the first holder and the death of any of the spouse, common-law partner, former spouse, former common-law partner, brothers and sisters (in this subparagraph referred to as “the survivor”) of the first holder, or

      • (II) if the holder is a trust

        1 in the case of a specified trust, for the life of an individual referred to in paragraph 104(4)(a) of the Act who is entitled to receive all of the income of the trust that arose before the individual’s death, or, in the case of a joint spousal or common-law partner trust, until the day of the later of the death of the individual and the death of the beneficiary under the trust who is the individual’s spouse or common-law partner,

        2 in the case of a qualified disability trust, for the life of an individual who is an electing beneficiary (as defined in subsection 122(3) of the Act) of the trust for the taxation year in which the annuity is issued,

        3 in the case of a trust (other than a qualified disability trust or specified trust) where the annuity is issued before October 24, 2012, for the life of an individual who is entitled to receive income from the trust, and

        4 in the case of a trust (other than a qualified disability trust or specified trust) where the annuity is issued after October 23, 2012, for the life of an individual who was entitled when the contract was first held to receive all of the trust’s income that is from an amount received by the trust on or before the individual’s death as a payment under the annuity,

    • (C) if the annuity payments are to be made over a term that is guaranteed or fixed, the guaranteed or fixed term not exceed 91 years minus the age, when the contract was first held, in whole years of the following individual:

      • (I) if the holder is not a trust, the individual who is

        1 in the case of a joint and last survivor annuity, the younger of the first holder and the survivor,

        2 in the case of a contract that is held jointly, the younger of the first holders, and

        3 in any other case, the first holder,

      • (II) if the holder is a specified trust, the individual who is

        1 in the case of a joint and last survivor annuity held by a joint spousal or common-law partner trust, the younger of the individuals referred to in paragraph 104(4)(a) of the Act who are in combination entitled to receive all of the income of the trust that arose before the later of their deaths, and

        2 in the case of an annuity that is not a joint and last survivor annuity, the individual referred to in paragraph 104(4)(a) of the Act who is entitled to receive all of the income of the trust that arose before the individual’s death,

      • (III) if the holder is a qualified disability trust, an individual who is an electing beneficiary of the trust for the taxation year in which the annuity is issued, and

      • (IV) if the holder is a trust (other than a qualified disability trust or specified trust) and the annuity is issued before 2016, the individual who was the youngest beneficiary under the trust when the contract was first held,

    • (D) no loans exist under the contract,

    • (E) the holder’s rights under the contract not be disposed of otherwise than

      • (I) if the holder is an individual, on the holder’s death,

      • (II) if the holder is a specified trust (other than a joint spousal or common-law partner trust), on the death of the individual referred to in paragraph 104(4)(a) of the Act who is entitled to receive all of the income of the trust that arose before the individual’s death,

      • (III) if the holder is a specified trust that is a joint spousal or common-law partner trust, on the later of the deaths of the individuals referred to in paragraph 104(4)(a) of the Act who are in combination entitled to receive all of the income of the trust that arose before the later of their deaths, and

      • (IV) if the holder is a trust, other than a specified trust, and the contract is first held after October 2011, on the earlier of

        1 the time at which the trust ceases to be a testamentary trust, and

        2 the death of the individual referred to in subclause (B)(II) or (C)(III) or (IV), as the case may be, in respect of the trust, and

    • (F) no payments be made out of the contract other than as permitted by this section,

  • (v) none of the terms and conditions of which provide for any recourse against the issuer for failure to make any payment under the contract, and

  • (vi) where annuity payments under the contract have commenced

    • (A) before 1987, in respect of which a holder thereof has notified the issuer in writing, before the end of the taxation year, that the contract is to be treated as a prescribed annuity contract,

    • (B) after 1986, in respect of which a holder thereof has not notified the issuer in writing, before the end of the taxation year in which the annuity payments under the contract commenced, that the contract is not to be treated as a prescribed annuity contract, or

    • (C) after 1986, in respect of which a holder thereof has notified the issuer in writing, before the end of the taxation year in which the annuity payments under the contract commenced, that the contract is not to be treated as a prescribed annuity contract and a holder thereof has rescinded the notification by so notifying the issuer in writing before the end of the taxation year.

(2) Notwithstanding subsection (1), an annuity contract shall not fail to be a prescribed annuity contract by reason that

• (a) where the contract provides for a joint and last survivor annuity or is held jointly, the terms and conditions thereof provide that there will be a decrease in the amount of the annuity payments to be made under the contract from the time of death of one of the annuitants thereunder;

• (b) the terms and conditions thereof provide that where the holder thereof dies at or before the time he attains the age of 91 years, the contract will terminate and an amount will be paid out of the contract not exceeding the amount, if any, by which the total premiums paid under the contract exceeds the total annuity payments made under the contract;

• (c) where the annuity payments are to be made over a term that is guaranteed or fixed, the terms and conditions thereof provide that as a consequence of the death of the holder thereof during the guaranteed or fixed term any payments that, but for the death of the holder, would be made during the term may be commuted into a single payment; or

• (d) the terms and conditions thereof, as they read on December 1, 1982 and at all subsequent times, provide that the holder participates in the investment earnings of the issuer and that the amount of such participation is to be paid within 60 days after the end of the year in respect of which it is determined.

(3) For the purposes of this section, the annuitant under an annuity contract is deemed to be the holder of the contract where

• (a) the contract is held by another person in trust for the annuitant; or

• (b) the contract was acquired by the annuitant under a group term life insurance policy under which life insurance was effected on the life of another person in respect of, in the course of, or by virtue of the office or employment or former office or employment of that other person.

(4) In this section, annuitant under an annuity contract, at any time, means a person who, at that time, is entitled to receive annuity payments under the contract.

(5) For the purpose of this section, spouse and former spouse of a particular individual include another individual who is a party to a void or voidable marriage with the particular individual.