11 August 2000 External T.I. 2000-0036905 - ELIGIBLE AMOUNT INHERITANCE

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 amounts received from a deceased parent's U.S. individual retirement account be rolled over to the recipient's RRSP under subparagraph 60(j)(ii) of the Act?

Position: No.

Reasons: The amount received from a deceased parent's U.S. individual retirement account would not be an eligible amount within the meaning assigned by section 60.01 and, as such, is not eligible for the deduction under 60(j) of the Act.

XXXXXXXXXX 								2000-003690
M.P. Sarazin
August 11, 2000

Dear Madam:

Re: Rollover of Amounts from Parent's IRA to
Child's RRSP XXXXXXXXXX

This is in response to your letter of April 27, 2000, which was forwarded to us by the Shawinigan-Sud Tax Centre, wherein you requested permission to transfer certain amounts received in XXXXXXXXXX from your deceased father's estate in respect of his U.S. individual retirement account ("IRA") to your registered retirement savings plan ("RRSP").

In XXXXXXXXXX, you received a U.S. Schedule K-1 Form indicating that you had received an amount out of your deceased father's IRA in XXXXXXXXXX. In fact, the amount was received from your deceased father's estate on XXXXXXXXXX. Enclosed with your letter was a T1 Adjustment Request notifying the Canada Customs and Revenue Agency (the "Agency") that your XXXXXXXXXX income had to be increased to include the amount received out of your deceased father's IRA. Since the RRSP contribution deadline for XXXXXXXXXX had passed, you were unable to contribute any of the amounts received from your deceased father's IRA to your RRSP in order to reduce the Canadian income taxes resulting from the IRA income inclusion. If the IRA amount is eligible for rollover to your RRSP, you have asked for permission to contribute the amount received from the IRA to your RRSP in XXXXXXXXXX and that you be allowed to claim a deduction in XXXXXXXXXX for the contribution. If the IRA amount is not eligible for rollover to your RRSP, you have asked for permission to contribute an amount equal to your unused RRSP deduction room which existed at the time the IRA amount was received to your RRSP in XXXXXXXXXX and that you be allowed to claim a deduction in XXXXXXXXXX for the contribution.

Comments

A foreign retirement arrangement ("FRA") is defined in subsection 248(1) of the Income Tax Act (the "Act") as a prescribed plan or arrangement. Section 6803 of the Income Tax Regulations provides that a plan or arrangement referred to in 408(a), (b), or (h) of the Internal Revenue Code of the United States (the "Code") is a FRA. The determination of whether your deceased father's IRA would constitute a FRA for purposes of the Act is a question of fact. However, we shall assume for discussion purposes that your father's IRA constituted an FRA for purposes of the Act.

Pursuant to subparagraph 60(j)(ii) of the Act, a taxpayer may transfer certain amounts that are included in the taxpayer's income for the year to an RPP or RRSP. One such amount is the amount determined under section 60.01 of the Act, which provides that an amount received by a taxpayer from an FRA is an eligible amount if certain conditions are met, including the following:

1) the amount must have been included in the taxpayer's income pursuant to clause 56(1)(a)(i)(C.1) of the Act; and

2) the amount must have been derived from contributions made to the FRA by either the taxpayer or the taxpayer's spouse or former spouse.

The Agency is of the opinion that when a Canadian taxpayer inherits a lump sum payment out of an IRA, the amount is taxable pursuant to clause 56(1)(a)(i)(C.1) of the Act. However, no part of the lump sum payment received by you is an "eligible amount" for purposes of paragraph 60(j)(ii) of the Act because it is not derived from contributions that you or your spouse or former spouse made to the IRA. Consequently, the amount inherited and received from your deceased father's IRA does not satisfy all the requirements under section 60.01 of the Act to be considered an "eligible amount" and the amount inherited cannot be transferred to an RRSP under paragraph 60(j) of the Act.

Your request to contribute an amount equal to your unused RRSP deduction room to your RRSP in XXXXXXXXXX and claim the deduction in XXXXXXXXXX involves an adjustment to a prior year's return, and therefore a decision must be rendered by the Assessment and Collections Branch. We are forwarding a copy of your letter and this reply to Mr. Kevin Stackhouse of the Pension and Trusts Division of the Individual Returns & Payment Processing Directorate and you may contact him at 613-957-9471 concerning the status of your request in this regard.

We trust the above comments will be helpful.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate

c.c. Kevin Stackhouse
Individual Returns & Payments Processing Directorate

Louise Fortier
PRP Agent, Shawinigan-Sud Tax Centre

Betty-Ann Ward
Client Services Directorate, 25 McArthur, Room C-100