19 June 2002 External T.I. 2002-0135445 - FOREIGN PROPERTY GRANDFATHERING

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:

Where shares held in an RRSP trust are not foreign property because of the 24-month grandfathering provision in subparagraph 206(2)(a)(iii), will the grandfathering continue where the annuitant transfers his or her holdings in the RRSP trust to another RRSP trust during that 24-month period?

Position: No.

Reasons:

In order to qualify for the grandfathering, the shares must become foreign property after their acquisition by the RRSP trust. This would not be the case where grandfathered shares are transferred to another RRSP.

XXXXXXXXXX 2002-013544
M. P. Sarazin, CA
June 19, 2002

Dear XXXXXXXXXX:

Re: Foreign Property and Transfers Between RRSPs

This is in reply to your letter of April 18, 2002, requesting our views as to whether property held in a trust governed by a deferred income plan (i.e., a registered retirement savings plan, a registered retirement income fund, a registered pension plan or a deferred profit sharing plan) that qualifies for the 24-month grandfathering under subparagraph 206(2)(a)(iii) of the Income Tax Act (the "Act") would continue to be grandfathered where the property is transferred to another deferred income plan trust for the same annuitant or member.

Comments

In your letter you have outlined an actual fact situation related to completed transactions. As noted in Information Circular 70-6R4, this Directorate can only provide advance income tax rulings in respect of specific proposed transactions. We must advise you that the review of completed transactions falls within the responsibility of your local tax services office. Information Circulars and Interpretation Bulletins referred to herein are available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html. Consequently, we can only provide you with the following general comments.

The Canada Customs and Revenue Agency's general views regarding the foreign property that may be held within deferred income plans are found in Interpretation Bulletin IT-412R2 entitled "Foreign property of registered plans". Paragraphs 7 and 8 of this Interpretation Bulletin deal with the grandfathering in subparagraph 206(2)(a)(iii) of the Act.

The 24-month grandfathering under subparagraph 206(2)(a)(iii) of the Act only applies where property becomes foreign property after it was last acquired by the deferred income plan trust. Where an annuitant transfers property that qualifies for the grandfathering under subparagraph 206(2)(a)(iii) of the Act from one of his or her deferred income plan trusts to another of his or her deferred income plan trusts, the property transferred to the transferee RRSP trust will cease to qualify for the 24-month grandfathering. In our view, the transferee deferred income plan trust would acquire the transferred property at the time of the transfer when it is foreign property for purposes of the Act and, as such, the property would not qualify for the 24-month grandfathering because it did not become foreign property after it was last acquired by the transferee deferred income plan trust. Since this result may not have been intended, we will forward a copy of our response to the Department of Finance for its consideration of the issue.

We trust that the above comments will be of assistance to you.

Yours truly,

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

c.c. Dave Wurtele
Department of Finance