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:
Whether "swap" of cash inside RRSP for securities held outside RRSP by annuitant which occurs at fair market value is a purchase and sale or a premium paid/benefit received.
Position:
Purchase and sale.
Reasons:
Where cash inside RRSP used to purchase annuitant's securities, it is a purchase and sale; potential capital gain to annuitant and income inclusion, capital loss deemed nil.
XXXXXXXXXX 971591
Attention: XXXXXXXXXX
July 9, 1997
Re: Transfer of Property to Registered Retirement Savings Plan ("RRSP")
This is in reply to your facsimile transmission of June 16, 1997, in which you ask whether cash in a self-directed RRSP trust can be "swapped" for the equivalent value of stocks and bonds held by the annuitant outside the RRSP. You ask whether such a transaction would be viewed as a purchase and sale of property or a premium paid to and benefit received out of the RRSP.
If the annuitant wishes to have his or her self-directed RRSP purchase stocks and bonds that are held outside an RRSP, the RRSP may pay cash for such securities and it will be viewed as a purchase and sale. If the purchase and sale occurs at fair market value, the securities are capital property to the annuitant, and each of the securities is a "qualified investment" for an RRSP trust, the only immediate tax consequences will be 1) the potential capital gain to the annuitant on the sale of the securities for proceeds which exceed the "cost amount" of the securities to the annuitant and 2) a potential income inclusion in respect of interest accrued on bonds. In accordance with clause 40(2)(g)(iv)(B) of the Income Tax Act, a loss on the sale of capital property by the annuitant to his or her self-directed RRSP is deemed to be nil.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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