11 January 2002 External T.I. 2001-0115485 - TRANSFER OF IRA TO RRSP

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 an amount that was transferred from a U.S. 401(k) plan to a U.S. IRA be subsequently transferred to an RRSP under paragraph 60(j)(ii) of the Act?

Position: Where conditions are satisfied, yes.

Reasons: An IRA is a foreign retirement arrangement that may be transferred to an RRSP

XXXXXXXXXX 						2001-011548
M. P. Sarazin, CA
January 11, 2002

Dear XXXXXXXXXX:

Re: Transfer of IRA to RRSP

This is in reply to your facsimile of December 12, 2001, requesting a ruling regarding the proposed transfer of amounts held in a Canadian individual's U.S. individual retirement account ("IRA") to a registered retirement savings plan ("RRSP"). The individual recently had his 401(k) pension entitlements transferred to his IRA.

Comments

In your letter you have outlined what is an actual fact situation related to a proposed transaction. As noted in Information Circular 70-6R4 entitled Advance Income Tax Rulings (available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide an opinion concerning the tax consequences associated with specific proposed transactions in the form of an advance income tax ruling. Consequently, we can only provide you with the following general 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 is a FRA. Therefore, an IRA described in section 408(a) of the Internal Revenue Code would be an FRA.

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 a registered pension plan or a 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 all of the following conditions are met:

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

(b) the amount cannot be part of a series of periodic payments. In other words, it has to be a lump-sum payment; and

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

With respect to (c) above, a FRA lump sum payment that was derived from an amount transferred to the FRA from a US retirement or pension plan at the direction of the taxpayer, or the taxpayer's spouse or former spouse satisfies the requirement that the lump sum must have been derived from contributions made to the FRA by such a person. Since the individual has acquiesced to such a transfer instead of receiving the funds out of the US retirement or pension plan, she or he would effectively be contributing the funds to her or his FRA. As such, a lump sum payment from an FRA is an eligible amount if it is in respect of an amount from a US retirement or pension plan previously contributed directly or indirectly to the FRA.

The Canada Customs and Revenue Agency generally considers a 401(k) plan to be a US retirement or pension plan.

It would be a question of fact whether or not other amounts transferred to an FRA would be considered to be from a US retirement or pension plan.

We trust these comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate