24 October 2001 External T.I. 2001-0103585 - RRIF FOREIGN CONTENT

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Application of foreign property limits to more than one RRSP trust and application of fairness provisions to waive the tax.

Position: Explained provisions

Reasons: The tax is assessed to individual trusts. The fairness provisions do not allow us to waive the tax.

XXXXXXXXXX 2001-010358
W. C. Harding
October 24, 2001

Dear XXXXXXXXXX:

Re: Part XI tax on Excess Foreign Property held in Registered Plans

This is in reply to your letter of June 20, 2001, in which you requested relief from the application of Part XI of the Income Tax Act (the "Act"), on the excess foreign property held in your RRSP. You submitted that relief under the fairness provisions of the Act is warranted because the aggregate foreign property held in your RRSP and LIRA would have been within the limit allowed under the Act if the two plans had been combined and because most literature on the subject does not make it clear that the tax is applicable to each plan.

Our Comments

The Canada Customs and Revenue Agency (the "CCRA") has provided its general views regarding the application of Part XI of the Act in Interpretation Bulletin IT-412R2 entitled Foreign Property of Registered Plans This bulletin is available on the internet at http://www.ccra-adrc.gc.ca/E/pub/tp/i412r2et/i412r2e.txt.html or from any tax services office. The bulletin does not reflect the recent increases from 20% to 25% (for 2000) and from 25% to 30% (for 2001 and subsequent years) to the foreign property limits, but otherwise explains the CCRA's views on this matter. In particular, paragraph 1 of the bulletin summarizes the provisions of Part XI and the calculation of the tax on excess foreign property under Part XI and paragraph 2 of the bulletin lists the taxpayers that are subjected to the tax. Paragraph 2(b) clarifies that a trust governed by an RRSP is a taxpayer that is subjected to Part XI taxes.

The fairness provisions under the Act were established to provide the CCRA with additional means to help clients who, because of extraordinary circumstances, are unable to meet their tax or duty obligations. The provisions give us the discretion, in certain situations, to cancel and waive penalties and interest; accept late-filed, amended, or revoked income tax elections; and issue income tax refunds beyond the normal three-year period to individuals and to some trusts. However, they do not permit us to refund taxes that are properly assessed. Accordingly, we have no means to provide the relief you have requested.

We trust that these comments will be of assistance to you.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch