20 September 1995 Internal T.I. 9520256 - PARTIAL WITHDRAWAL AND DEREGISTRATION

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Is an RRSP deregistered at the time an annuitant requests a withdrawal?

Position TAKEN:

No

Reasons FOR POSITION TAKEN:

Subsequent to 1985, subparagraph 146(2)(a)(ii) allows an RRSP to make a payment to an annuitant prior to maturity of the plan.

			September 20, 1995

	HEADQUARTERS	HEADQUARTERS
	Source Deductions Division	M.P. Sarazin
	Jim Ivey	(613) 957-3499
	Chief	

Attention: B. Larocque
			952025

Subsection 146(12) of the Income Tax Act

This is in reply to your memo of August 1, 1995 requesting our opinion as to whether subsection 146(12) of the Income Tax Act (the "Act") would apply at the time that an annuitant requests the redemption of the registered retirement savings plan ("RRSP") or at the time that the RRSP is actually redeemed by the annuitant.

In a letter (the "Letter") issued on October 3, 1986, Head Office, Taxpayer Assistance Section stated:

"Regardless of when the plan was actually terminated or when the funds were actually received from the deregistered plan, the formal request on November 17, 1983 to amend the plan in such a way as to allow a withdrawal from the plan prior to maturity caused the plan to be deregistered at that time. Subsection 146(12) of the Income Tax Act "Change in plan after registration" states "the taxpayer shall in computing his income for a taxation year, include as income received at that time" etc."

You are of the view that the position expressed in the Letter is an incorrect interpretation and application of subsection 146(12) of the Act. Even though a request for redemption of the RRSP was made in 1983, the actual redemption took place in 1984 and you believe that the provisions of subsection 146(12) of the Act should only apply in 1984 because the annuitant only received the benefits from the RRSP in 1984.

An RRSP is deregistered when it is so amended that it no longer satisfies the requirements of subsections 146(2) and (3) of the Act for registration. Where an amendment or revision to an RRSP results in its deregistration, the annuitant under the RRSP is required under paragraph 146(12)(b) of the Act to include an amount equal to the fair market value of all of the property of the RRSP immediately before that time in his or her income for the taxation year that includes that day. In any case, it is a question of fact as to whether or not an amendment or revision would result in the deregistration of an RRSP.

Prior to 1986, subparagraph 146(2)(a)(i) of the Act did not allow RRSPs to permit premature withdrawals by the annuitant under the plan. We were of the view that where, at a particular time prior to 1986, an annuitant completed, signed and submitted a withdrawal application to the RRSP carrier, and this was accepted by the RRSP carrier, there would have been an amendment or revision to the RRSP such that it permitted a payment of a benefit (defined in paragraph 146(1)(b) of the Act, as it read prior to 1986, to include a payment resulting from termination) before maturity (defined in paragraph 146(1)(d) of the Act, as it read prior to 1986) which did not comply with the registration requirements of the Act (specifically the requirements of former subparagraph 146(2)(a)(i) of the Act). In this case, the deregistration was considered to have taken place when the RRSP carrier agreed to the withdrawal (i.e. acceptance by the carrier of the withdrawal application) and the date of the actual payment to the extent it was later was considered irrelevant. Consequently, the Letter reflected the Department's position with respect to pre-1986 RRSP withdrawals.

As a result of the introduction of subparagraph 146(2)(a)(ii) which is applicable to 1986 and subsequent taxation years, an RRSP carrier is allowed to make a payment out of the RRSP to the annuitant without the RRSP becoming deregistered. Subsequent to 1985, where a request for termination of an RRSP is made in December of Year 1 and the payment is made in January of Year 2, an annuitant would only include in income the amount received in Year 2 as a benefit under the RRSP. It should be noted that the term "benefit" is defined in subsection 146(1) of the Act and includes any amount paid to an annuitant resulting from the termination of the RRSP.

We trust the above comments will be of assistance to you.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch