Here's how it plays out:

Someone who receives a defined benefit pension income, at any age, is allowed to split up to half of it with his/her spouse or common-law partner for tax purposes.

The split isn't a physical gift of the money; it's a notional one for tax purposes, signed for on each spouse's income tax form annually.

Each of the partners is allowed the tax credit on the first $2,000 of the pension income.

So if George earns $30,000 from his pension plan, he can, for tax purposes, transfer up to $15,000 of it to Martha.

Each would then be taxed on only $15,000 of pension income, and each could use all the individual personal tax credits and the pension income tax credits available to him or her.

The most obvious calculation is where George's total net income (pension plus investment income, plus RRIFs, plus Canada Pension Plan Benefits, plus Old Age Security benefits, plus any income from employment or rentals, Employment Insurance payments etc.) is over the ceilings for OAS ($63,511) or E.I. payments ($50,000), which causes some or all of those benefits to be repaid - the so-called "claw back".

By splitting the pension income with Martha, who has little or no other income, George may be able to bring his net income under the social benefits repayment ceilings and save a significant sum.

In lower tax brackets, it could mean not having the age credit reduced.

Folks who have RRIF or annuity income that don't come from defined benefit plans must be 65 or older before it can be termed "pension income" under the splitting rules.

In addition, while the taxpayer may split his RRIF/Annuity based pension income with a younger partner, if he/she is under age 65, no pension income tax credit is available to that spouse. It's still helpful, but certainly imposes an undue burden on a significant portion of society.

That's makes the legislation discriminatory. It's probably a distinction that legislators and swivel servants don't fully appreciate, since they're covered by significant defined benefit plans.

However, more Canadians aren't covered by such employer-based plans than are covered by them.

In effect, if an 80-year-old with a workplace pension marries a 20-year-old (more power to him), he could split his pension income with her and she would be entitled to claim the pension income tax credit.

On the other hand, if a 66-year-old who receives his pension income from an RRIF accumulated during his working life splits it with his 63-year-old spouse, she's not entitled to claim the pension income credit.

It's a nonsensical distinction representative only of bureaucratic character, and the hope is that in the near future, it could be eliminated.