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:
Where paragraph 204.9(5)(c) of the Act does not apply and a partial transfer of property is made from one RESP (transferor plan) to another RESP (transferee plan), are all of the contributions made to the transferor plan deemed to be contributions made by each beneficiary under the transferee plan?
Position: Yes.
Reasons: Intepretation of paragraphs 204.9(5)(b) and (c) of the Act.
May 29, 2002
HEADQUARTERS HEADQUARTERS
Registered Plans Directorate Gary Allen
Mark Legault 952-9853
Manager
Policy and Communications Section
2002-013467
Interpretation of Paragraphs 204.9(5)(b) and (c) of the Income Tax Act
This is in reply to your memorandum dated April 15, 2002, wherein you requested our interpretation of the above-referenced paragraphs of the Income Tax Act (the "Act"). In your memorandum, you provide the following example and request our opinion concerning the application of paragraphs 204.9(5)(b) and (c) given two possible scenarios.
Example:
Plan A - 2001 contribution - $4,000 for John
Plan B - 2001 contribution - $4,000 for Mary
- 2001 contribution - $4,000 for Paul
Scenario 1:
Beneficiaries under Plans A & B are not siblings and $100 is transferred from Plan A to Plan B and allocated to Mary.
Scenario 2:
Beneficiaries under Plans A & B are siblings and $2,000 is transferred from Plan A to Plan B and allocated to Mary.
Paragraph 204.9(5)(b) of the Act provides that where property is transferred from one registered education savings plan ("RESP") (the "transferor plan") to another RESP (the "transferee plan"), each contribution that was made in respect of a beneficiary, by or on behalf of a subscriber, into the transferor plan is deemed to have been made by the subscriber in respect of each of the beneficiaries under the transferee plan at the time the contributions were made into the transferor plan, provided that the conditions of paragraph 204.9(5)(c) of the Act do not apply.
In general, paragraph 204.9(5)(c) provides that paragraph 204.9(5)(b) will not apply where the conditions of subparagraph 204.9(5)(c)(i) or 204.9(5)(c)(ii) of the Act apply. Subparagraph 204.9(5)(c)(i) applies where there is a common beneficiary under the transferor and transferee plans. Subparagraph 204.9(5)(c)(ii) applies where a beneficiary under the transferor plan is a sibling of an under 21 years of age beneficiary under the transferee plan.
Under Scenario 1, all contributions made into Plan A ($4,000) are deemed to have been made by a subscriber in respect of each beneficiary under Plan B at the time the contributions were originally made to Plan A. Therefore, the $4,000 in contributions in Plan A are deemed to have been made by a subscriber in respect of Mary and Paul at the time the contributions were originally made into Plan A.
Under Scenario 2, provided that the conditions of subparagraph 204.9(5)(c)(ii) are satisfied, paragraph 204.9(5)(b) will not apply. Therefore, the transfer will not affect Mary's annual and lifetime contribution limits and there will not be any Part X.4 tax consequences as a result of the transfer.
With regard to whether a promoter would need to track the contribution history for the purpose of administering the provisions of subsection 204.9(5), we are not in a position to comment on the implementation of administrative policies to ensure compliance with the Act, as this does not fall within our mandate. However, we do wonder how such compliance could be ensured without such information.
Roberta Albert
Manager
Income Tax Rulings Directorate
Policy and Legislation Branch
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