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: 1) A RRIF did not make its minimum payment, will subsection 146.3(11) apply? 2) Can a RRIF dispose of its property to the annuitant?
Position: 1) Question of fact. 2) Yes.
Reasons: 1) Registered Plans Division would make this determination. 2) Nothing in the Act to prevent transactions between RRIF and annuitant.
XXXXXXXXXX 2000-006065
M. P. Sarazin, CA
Attention: XXXXXXXXXX
January 3, 2001
Dear Sirs:
Re: Valuation of Property held in a Registered Retirement Income Fund ("RRIF")
This is in reply to your facsimile of December 7, 2000, requesting our views regarding the valuation of property held in certain RRIFs.
Certain RRIFs did not make the required minimum payment in 1999 because their only assets were the units of a trust which have apparently devalued to a nominal amount. You have requested that the trustee of the RRIFs terminate the RRIFs by distributing the units to the RRIF annuitants at their fair market value. The trustee of the RRIF will not distribute the property without the approval of the Canada Customs and Revenue Agency.
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.
The trustee of the RRIF could apply for an advance income tax ruling in respect of the proposed property distribution by the RRIFs to their annuitants. The Act does not prevent the annuitant under the RRIF from acquiring property from his or her RRIF at its fair market value. Alternatively, the RRIF could distribute its property to the annuitants and the fair market value of the property would constitute a benefit received by the annuitant from the RRIF. In either case, the RRIF would cease to exist as of that time because it would not hold any property. The determination of the fair market value of any property is a question of fact. We suggest that the fair market value issue be taken up with the relevant tax services office.
Under paragraph 146.3(2)(a) of the Income Tax Act (the "Act"), the RRIF carrier is required to pay one or more amounts the total of which is not less than the minimum amount as defined in subsection 146.3(1) of the Act. The determination of whether the non-payment of the minimum amount by a RRIF would result in the RRIF becoming an "amended fund" as provided under subsection 146.3(11) of the Act is the responsibility of the Registered Plans Division of the Agency. If it is determined that the non-payment of the minimum amount resulted in an amended plan for purposes of subsection 146.3(11) of the Act, the RRIF will be deemed for purposes of the Act not to be a registered retirement savings plan and the annuitant would have to include the fair market value of the property held in the RRIF in his or her income at that time.
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. Consequently, an annuitant can not contribute property to the RRIF in order for it to meet its payment obligations.
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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