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: When a transfer of property is made from an RRSP to RRIF of the same annuitant, is the transfer made at the fair market value of the property?
Position: Yes.
Reasons: Subsection 206(4) deems the RRIF and RRSP trusts to deal at non-arm's length, and transfer therefore is deemed by same provision to occur at fair market value.
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Martin Cauchon, Minister of National Revenue, has asked me to reply to your letter of May 18, 2000, concerning subsection 206(4) of the Income Tax Act (the Act) and whether this subsection applies when property is transferred from a registered retirement savings plan (RRSP) to a registered retirement income fund (RRIF).
The Act imposes a limit on how much foreign property can be held in a trust governed by an RRSP or RRIF and applies a tax (Part XI tax) on any excess foreign property held in your RRSP or RRIF trust. Part XI tax applies if, at the end of any month, the amount of foreign property exceeds a specified limit. The limit is generally 20% of the "cost amount" of all property held in the RRSP or RRIF.
The Federal Budget of February 28, 2000, announced that the foreign property investment limit applicable to certain deferred income plans, including both RRSP and RRIF trusts, will be increased to 25% for 2000 and to 30% for 2001 and future years. The proposed increase to the foreign property limit for 2000 will be retroactive to January 1, 2000.
When property is transferred from an RRSP trust to a RRIF trust for the same annuitant, the provisions of subsection 206(4) of the Act apply and the property received by the RRIF trust will have a cost amount equal to the fair market value of the property on the date it is transferred.
On June 5, 2000, the Department of Finance released a Notice of Ways and Means Motion to introduce amendments which will apply to the transfer of property between RRSP trusts, between an RRSP and RRIF trust, and between RRIF trusts. One of the intents of this draft legislation is to confirm that a transfer before 2000 between an RRSP and RRIF of the same annuitant will generally occur at the fair market value of the property. As noted in this release, for further information on the draft legislation you can phone Mr. Grant Nash of the Tax Legislation Division, Department of Finance at (613) 992-5287 or write to him at 140 O'Connor Street, Ottawa, Ontario K1A 0G5.
I trust my comments will be of assistance.
Yours sincerely,
Bill McCloskey
Assistant Commissioner
Policy and Legislation Branch
Mary Pat Baldwin
957-2087
June 13, 2000
2000-002923
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