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 a RRIF annuitant enter into a contract on behalf of the RRIF?
Position: No.
Reasons: RRIF property is owned by the RRIF and only the RRIF itself can enter into contracts in respect of RRIF property.
XXXXXXXXXX 2000-005970
M. P. Sarazin, CA
Attention: XXXXXXXXXX
January 9, 2001
Dear Sirs:
Re: Call Option Transaction and RRIF Annuitant
This is in reply to your letter of November 1, 2000, addressed to the Registered Plans Division of the Canada Customs and Revenue Agency, requesting our views as to whether a registered retirement income fund ("RRIF") annuitant may carry out transactions on behalf of the RRIF without the trustee of the RRIF's knowledge of the transactions.
Confirmation of the tax consequences associated with completed transactions are provided by the relevant tax services office. Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.
In subsection 146.3(1) of the Income Tax Act (the "Act"), "property held" in connection with a retirement income fund is defined to mean property held by the carrier of the fund, whether held by the carrier as trustee or beneficial owner thereof. Clearly, an annuitant under a RRIF does not own the property held in the RRIF and, as such, the annuitant cannot enter into contracts in respect of the property held by his or her RRIF. Where it is clear that the RRIF carrier is not a party to a contract between an annuitant and his broker, the RRIF does not have any contractual obligations under that contract.
There is nothing in the Act that would prevent the RRIF from transferring property to the annuitant so he could meet his contractual obligations. However, the transfer of the property would be considered a benefit provided by the RRIF to the annuitant and the fair market value of the property on the transfer date would have to be included in the annuitant's income under subsection 146.3(5) of the Act.
Alternatively, the annuitant may acquire the property from his RRIF for its fair market value. The property could be used by the annuitant to satisfy his obligations under the contract and he would not have to include any benefit in his income under subsection 146.3(5) of the Act. Whether a transaction between a RRIF and an annuitant is carried at fair market value is a question of fact.
Under the terms of its registration, a RRIF cannot accept property as consideration thereunder other than property transferred in accordance with subparagraphs 146.3(2)(f)(i) to (vii) of the Act. Since the RRIF is not a party to any contract between the annuitant and his broker, the RRIF cannot accept any proceeds resulting from the annuitant's contract with his broker because the resulting contribution would offend paragraph 146.3(2)(f) of the Act.
We trust the above comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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