April 21, 1943

LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not think it has. I think the Chairman was reading from what I sent him, but I am not certain.

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LIB

Joseph-Arthur Bradette (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

The CHAIRMAN:

On the question asked by the leader of the opposition, I took the copy from another hon. member.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Well, that is all right. All I want to be perfectly certain about is that what we passed is the mimeographed amendments.

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NAT

Gordon Graydon (Leader of the Official Opposition)

National Government

Mr. GRAYDON:

Would it be asking too much to read this again, to make certain that we are not making any error and that nothing can creep in afterwards which may cause some difficulty? We must pass this correctly.

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Amendment agreed to. Section 33 as amended agreed to. Title agreed to. Bill reported. Mr. ILSLEY moved the third reading of the bill. * Mr. HARRY R. JACKMAN (Rosedale): I wish to call the attention of the minister as briefly as I can to section 1 of the amendments having to do with the annuity payments. I am not quite clear as to what the minister said last night, that he is not adopting a change in principle. The amendment reads: Provided, however, that annuity payments or other annual payments received under the provisions of any will or trust which become effective prior to the first day of January, 1944, shall be exempt to the extent of the amount paid out of the corpus of the estate or trust but not exceeding $1,500 in any year. The first small matter I wish to clear up is, does the SI ,500 refer to the total disbursements in a year out of the estate, which disbursements include income, or does it include the encroachment on capital alone?


LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The encroachment oh capital.

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NAT
LIB
NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

I thought that would be

it. I am still somewhat in doubt as to how these annuities,. first under wills and trusts,

Income War Tax

and, second', under contracts, are being treated. As I understand it, if there were no life contingency,, the minister would be willing to follow the practice now observed in connection with life insurance annuities, where the contract is divisible as to a term certain and as to a life contingency. Is the minister aware of what I am referring to?

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LIB
NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

Instead of taking out the straight life annuity now, you can, as I understand it, take one out for a period of twenty or thirty years. That is a definite contract with a definite term attached to it, and there is some formula-I have seen, it, although I dto not recall exactly what it is- worked out with the department whereby the sum of money paid for that definite term is divisible into principal and into income and the taxpayer pays only on that part of it which is income. Do I understand that the minister is willing to make a similar exemption or give like consideration to all annual payments or annuity contracts where there is a straight term certain rather than a full life contingency?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I understand that is the law.

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NAT
LIB
NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

Because I was approached at two o'clock when I was about to enter the chamber by one who should be in a position to know, and there seemed to be some doubt in regard to it.

May I point out to the minister that in part I, section 3, under paragraph (b)

. . . annuities or other annual payments received under the provisions of any contract except as in this act otherwise provided. . . .

are taxable. With all the discussion we have just had here it is not possible to separate principal and income.

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LIB
NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

Let us take soldiers' insurance. Supposing a soldier's beneficiary who does not get the full amount of the contract, say So,000, when the soldier dies, but has an immediate payment of $1,000 and the other $4,000 is paid out over a five-year period in annual instalments. Under this act would those annual instalments be taxable as income?

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I point out that Mr. Speaker is in the chair and that this is a speech on third reading that the hon. gentleman is making. Apart from that, I would not care to rule so rapidly on these problems he is putting.

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NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

All I wish to say is that there seems to be some doubt in connection with these annuities, and it all flows from the fact that the minister will not adopt the accounting practice and logic of separating income from principal in connection with life contracts. There is still a hardship on the Canadian people.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Hon. J. L. ILSLEY (Minister of Finance):

The hon. gentleman was putting a question about taxability of term annuities, and I told him what I understand the law to be. I am not saying that in any authoritative way, but that is my understanding of the law. There is a possibility of a life contingency being mixed up with a term annuity in such a way that it would be difficult to know whether it is taxable or not. Certain litigation is proceeding now on at least one of those cases. I do not want anything that I may have said to be interpreted as expressing an opinion as to the merits of any case that is before the courts.

Motion agreed to and bill read the third time and passed.

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April 21, 1943