22 November 2006 External T.I. 2006-0207371E5 - benefits from deceased annuitant's unmatured RRSP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: What is the authority for instructing RRSP carriers to report income earned by an unmatured, insured RRSP after the date of the annuitant's death and paid to the annuitant's spouse as a refund of premiums?

Position: By virtue of the definitions of "refund of premiums" and "tax-paid amount" in the Act, all amounts paid to a spouse from an insured, unmatured RRSP of a deceased annuitant qualify as a refund of premiums, reportable in Box 18 of the T4RSP. This applies to all income earned by the RRSP after the annuitant's date of death until the distribution to the spouse.

Reasons: Interpretation of the Act.

									2006-020737
XXXXXXXXXX 								Renée Shields
(613) 948-5273
November 22, 2006

Dear XXXXXXXXXX:

Re: Reporting of Registered Retirement Savings Plan ("RRSP") benefits

This letter is in response to your electronic correspondence of September 25, 2006 requesting that we provide the statutory authority for the reporting instructions contained in the T4RSP and T4RIF Guide (the "Guide") with respect to payments to the spouse of a deceased annuitant of an unmatured, insured RRSP. Specifically, your question relates to situations in which the payment from the insured RRSP to the spouse does not take place until several years after the death of the annuitant, thereby including income earned during the period from death to the ultimate date of distribution. You are requesting confirmation that this income amount is to be reported as a refund of premiums.

An RRSP benefit is included in income pursuant to subsection 146(8) of the Income Tax Act (the "Act"). Paragraph 214(1)(a) of the Income Tax Regulations (the "Regulations") requires every person paying amounts included in the recipient's income under subsection 146(8) of the Act to make an information return in prescribed form. The prescribed form is the T4RSP and Box 18 on the T4RSP is to be used to record the payment of a refund of premiums. Neither the Act nor the Regulations contain step-by-step instructions regarding the completion of the T4RSP. It is for this reason that assistance is provided in the Guide.

Of significance to this discussion are the definitions of "refund of premiums" and "tax-paid amount," both of which are found in subsection 146(1) of the Act. Generally, a refund of premiums is defined to be any amount paid out of an RRSP to the spouse of the annuitant (or to a financially dependent child or grandchild), where such payment is made as a result of the annuitant's death. A tax-paid amount, which is specifically excluded from the definition of refund of premiums, is defined to be certain amounts paid from a trusteed RRSP and certain amounts paid from a depositary RRSP. The fact that a tax-paid amount can arise in depositary and trusteed RRSPs creates special reporting considerations for these types of RRSPs. However, you will note that there is no definition of a tax-paid amount in the context of an insured RRSP. As such, there cannot be a tax-paid amount paid from an insured RRSP and these special reporting considerations do not arise in the context of insured RRSPs.

Given the foregoing definitions, where as a consequence of the death of the annuitant, an amount is paid out of an unmatured, insured RRSP to the spouse of the deceased annuitant, this amount will be a refund of premiums, notwithstanding that the amount may include income earned by the insured RRSP during the years after the annuitant's death. Because this amount would be considered a refund of premiums, the Guide directs that such payments be reported in Box 18 of the T4RSP.

I trust these comments are helpful.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch