Other Income and Deductions

AuthorVern Krishna
ProfessionProfessor of Common Law, University of Ottawa Barrister at Law
Anglo-Canadi an tax law insi sts upon income having a source. The
source theory does not, however, conveniently embrace all receipts. To
this point, we have examined the rules governing the computation of
income from the following specif‌ically identif‌ied sources off‌ice, em-
ployment, business, property and capital gains. There are certai n types
of income that one cannot conveniently identify as orig inating from,
or relating to, these named sources. These are loosely categorized as
“other sources” of income, a grouping that comprises various receipts
and allowances that do not have a common link.
The taxable base should be broad and inclusive if we use it as t he
measure of a taxpayer’s ability to pay. Section 56 of the Act brings into
income a variety of receipts that one may not necess arily include through
one of the named sources of income. It is, however, important to note
the opening words of section 56: “Without restricting the generality of sec-
tion 3, there shall be included in computing the income of a taxpayer for
a taxation year” [emphasis added]. Section 56 does not curtail t he scope
of section 3. Income from a source inside or outside Canada — th at is, in-
come from any source regardless of location — is included in section 3.
Section 56 contains a long list of items. In t his chapter we look only
at some of the more signif‌icant items, including:
• Pension benef‌its;
• Death benef‌its;
• Support pay ments;
• Indirect payments;
• Retiring allowances;
• Scholarsh ips, bursaries and fel lowships;
• Research grants;
• Pri zes; and
• Social assi stance payments.
In theory, pension benef‌its accrue gradual ly as the employee’s pension
grows through employer contributions and investment earnings. For
most tax purpose s, however, pension income is taxable when the tax-
payer receives his pension.
Employer contributions to employee registered pension plans are
not taxable as employment-sou rce income.1 Within specif‌ied l imits,
employees can also deduct contributions to a regi stered pension fund
or plan.2
Pension benef‌its from a pension plan (not including benef‌its from
an employee benef‌it plan) are taxable upon their withdrawal from the
plan and are included in income in the year t hat the taxpayer receives
An employee must include all pension benef‌its in income as she re-
ceives them. This is so whether the pay ments are under a registered or
unregistered plan, lump sum, or per iodic. Pensions and supplementary
pensions received under the Old Age Security Act and the Canada Pen-
sion Plan are also taxable as income.4
Registration of pension plan s is of importance only in determi ning
the deductibility of contributions to a plan; it has no bearing on the
taxability of receipts out of a plan. All pensions to taxpayers resident
in Canada are t axable.
1 Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA], subpara 6(1)(a)(i); subs 248(1)
“superannuat ion or pension benef‌it.”
2 Ibid, para 8(1)(m).
3 Ibid, sub para 56(1)(a)(i); Muller v MNR (1960), 26 Tax ABC 295 (pension does
not have to be related to a n off‌ice or employment to be taxed).
4 Equivalent pay ments under Quebec plans ar e also included in the tax payer’s

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT