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 ISSUE:
Whether the income tax payable by the annuitant of a spousal RRSP constitute consideration for the purpose of paragraph 160(1) of the Act.
Position: No
REASON: Legislative analysis.
XXXXXXXXXX 2002-014537
L. J. Roy, CGA
June 26, 2002
Dear XXXXXXXXXX:
Re: Spousal RRSP contributions
This is in reply to your letter of June 10, 2002 wherein you requested our comments on whether the income tax payable by the annuitant of a spousal registered retirement savings plan ("RRSP") constitutes consideration for the purpose of section 160 of the Income Tax Act (the "Act").
An RRSP is a tax creation the purpose of which is to provide the annuitant with a tax deferred savings plan to fund retirement. The provisions of the Act also allows income splitting between spouses by allowing, with certain restrictions, the deductibility of amounts paid to a RRSP by a taxpayer whose spouse is the annuitant under the plan. Where the annuitant spouse withdraws amounts from the spousal RRSP that relate to contributions made by the taxpayer, such amounts are generally taxable in the spouse's hands.
For the purpose of paragraph 160(1)(e) of the Act, 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 at that time of any consideration given for the property.
It is our view that the income tax liability created by the taxation of a spousal RRSP withdrawal does not represent a consideration given by the spouse for the property transferred but constitutes an obligation of the annuitant pursuant to the Act. Consequently, such an amount is not consideration for the purpose of section 160 of the Act because it is not value given by the spousal annuitant.
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 70-6R5.
Manager
Financing and Plans Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislative Branch
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