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:
Whether paragraph 160(1) of the Act is applicable to a spousal RRSP contribution?
Position: Yes
REASON: Legislative analysis and jurisprudence.
XXXXXXXXXX 2002-013695
L. J. Roy, CGA
May 27, 2002
Dear XXXXXXXXXX:
Re: Spousal RRSP contributions
This is in reply to your letters of March 18 and May 3, 2002 wherein you requested our comments on whether section 160 of the Income Tax Act (the "Act") can be applied to a spousal Registered Retirement Savings Plan (" spousal RRSP") contribution.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4 entitled Advance Income Tax Rulings, dated January 29, 2001. Where the particular transactions are completed, the enquiry should be addressed to the relevant tax service office. The following comments are, therefore, of a general nature only and are not binding on the CCRA.
Paragraph 160(1)(e) of the Act provides that when property is transferred by an individual to his or her spouse, the transferor and the transferee would be jointly and severally liable for any amount which the transferor is liable to pay under the Act in or in respect of the taxation year in which the property was transferred or any preceding taxation year. However, the liability of the transferee is limited to the excess of the fair market value of the property at the time of the transfer over the fair market value of any consideration given for the property.
The term "transfer" has a broad meaning that encompasses virtually any means by which ownership or title to property is conveyed from one person to another, or to a trust. The definition of the term "transfer" cited in a number of tax cases is that expressed by Mr. Justice Thorsen in Fasken Estate v. M.N.R. 48 DTC 491 which is as follow:
"The word "transfer" is not a term of art and has not a technical meaning. It is not necessary to a transfer of property from a husband to his wife that it should be made in any particular form or that it should be made directly. All that is required is that the husband should so deal with the property as to divest himself of it and vest it in his wife, that is to say, pass the property from himself to her. The means by which he accomplishes this result, whether direct or circuitous, may properly be called a transfer."
Property is defined for the purposes of the Act in subsection 248(1) of the Act as meaning property of any kind whatever, whether real or personal, corporeal or incorporeal and without restricting the generality of the foregoing includes, among others, rights and money.
In our view, a contribution to an RRSP can only be achieved by the transfer of a property such as cash or shares. Also, where a taxpayer transfers property to his RRSP or a spousal RRSP, the taxpayer will have a disposition of the property so transferred at that time for an amount equal to the fair market value and a gain or loss may occur. Consequently, it is our view that a contribution by a taxpayer to a spousal RRSP would be a transfer of property for the purpose of section 160 of the Act. Such a transfer would occur at the time the contribution is made.
Finally, it is our view that there is no double taxation since section 160 does not require a particular amount to be included in income more than once, it only insures the collection of taxes for which the transferor is liable in or in respect of the taxation year in which the property was transferred.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.
For/Manager
Financing and Plans Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislative Branch
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