2 January 1996 Internal T.I. 9527316 - RCA CARVED OUT OF RPP, AVOID REVOCATION

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:

Can 56(10) result in a portion of an RPP being carved out to form an RCA in order to avoid RPP revocation?

Position:

No

Reasons:

The provision was not designed to apply to this situation and should not allow such interpretation

							January 2, 1996

	HEADQUARTERS				HEADQUARTERS
	Registered Plans Division	M.P. Sarazin
	Stella M. Black			(613) 957-3499
	Director
							952731

Subsection 56(10) and the XXXXXXXXXX

This is in reply to your memorandum dated February 6, 1995 which we received on October 16, 1995, wherein you requested our opinion on whether subsection 56(10) of the Income Tax Act (the "Act") would apply to allow a portion of a registered pension plan ("RPP") that could result in the RPP's revocation to be severed and considered a retirement compensation arrangement for purposes of the Act.

Facts

XXXXXXXXXX

suggested that the provisions of subsection 56(10) would have applied to allow the benefits accrued to the connected persons after 1988 to become a retirement compensation arrangement ("RCA") while the benefits accruing to the other members retained its status as pension benefits.

XXXXXXXXXX

Comments

An RCA is defined in subsection 248(1) of the Act and paragraph (a) of the definition specifically excludes an RPP. The revocation of an RPP could result in the plan becoming an RCA because the plan would no longer be specifically exempted under the RCA definition. Since there is no provision in section 147.1 of the Act that allows for the revocation of only part of an RPP, we are of the view that subsection 56(10) of the Act could not apply in the above situation. Subsection 56(10) does not apply before the RCA exists, and there is no RCA until after the registration of the RPP is revoked. However, should the revocation of the RPP result in part of the plan becoming an RCA and another part of the plan becoming an employee benefit plan or a salary deferral arrangement, the provisions of subsection 56(10) of the Act would apply at that point in time.

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