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.
In the circumstances of the case, will a transfer of an amount from an RRSP of a former spouse of an individual to the individual's RRSP in settlement of future support payments satisfy the requirements of 146(16) of the Act?
The payment will be made in accordance with an amendment of a separation agreement and/or a court order the effect of which is to vary the terms of the original agreement relating to the division of property between the former spouses in settlement of rights arising out of, or on the breakdown of their marriage.
Re: Advance Income Tax Ruling - XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX, requesting an advance income tax ruling on behalf of the above-noted Taxpayer.
Definitions and Abbreviations
In this letter, the following terms have the meanings specified:
(a) "Act" means: the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof;
(b) "Agreement" means: The Separation Agreement entered into between the Taxpayer and the Spouse dated XXXXXXXXXX as amended by the Amending Agreement dated XXXXXXXXXX. Copies of the Separation Agreement and the Amending Agreement were provided with your request;
(c) "Interim Minutes" means: the Interim Minutes of Settlement dated XXXXXXXXXX, a copy and a transcribed copy of which were provided;
(d) "New RRSP" means: XXXXXXXXXX, which will be owned by the Taxpayer and registered as a retirement savings plan with the Agency;
(e) "RRSP" means: XXXXXXXXXX owned by the Taxpayer and registered as a retirement savings plan with the Agency;
(f) "Taxpayer" means: XXXXXXXXXX;
(g) "Spouse" means: XXXXXXXXXX;
(h) "Spouse's RRSP" means: a registered retirement savings plan which will be owned by the Spouse and registered as a retirement savings plan with the Agency;
(h) "Agency" means: the Canada Customs and Revenue Agency.
1. The Taxpayer and the Spouse were married XXXXXXXXXX but have lived separate and apart since XXXXXXXXXX.
2. The Taxpayer and the Spouse entered into the Separation Agreement on XXXXXXXXXX and entered into the Amending Agreement on XXXXXXXXXX. The Agreement provides, among other things, for periodic monthly support in the amount of $XXXXXXXXXX.
3. The Taxpayer has retired and is no longer engaged in full time employment. Under the Agreement, this may constitute a material change in circumstances and court proceedings have, as a consequence, commenced.
4. In anticipation of a settlement, the Taxpayer and the Spouse have entered into the Interim Minutes to amend the Agreement. The Interim Minutes provide, among other things, that:
a) XXXXXXXXXX the Agreement providing for spousal support would cease to have any force and effect;
b) XXXXXXXXXX the Agreement providing for material change would cease to have any force and effect;
c) the Taxpayer would direct his financial advisor to transfer $XXXXXXXXXX from the RRSP to the New RRSP wherein the funds would remain frozen, save and except for the payment of monthly support payments on XXXXXXXXXX of each month thereafter;
d) the Taxpayer would ensure an amount of $XXXXXXXXXX would remain in the RRSP pending any further agreement or court order; and
e) the Taxpayer would not alter the investment mix of the New RRSP without written permission of the Spouse.
5. The Taxpayer and the Spouse propose to amend the Agreement in a manner consistent with the Interim Minutes and to, among other things:
a) delete XXXXXXXXXX of the Agreement providing for spousal support so that it will cease to have any force and effect;
b) delete XXXXXXXXXX of the Agreement providing for material change so that it will cease to have any force and effect;
c) include a provision that the Taxpayer will transfer $XXXXXXXXXX from the New RRSP to the Spouse's RRSP.
Purpose of the Proposed Transaction
6. The Agreement provides for periodic monthly support which is now being deleted in favour of a lump sum transfer of an amount from the Taxpayer's New RRSP to the Spouse's RRSP. The transfer represents a division of property between the Taxpayer and the Spouse in settlement of rights arising out of, or on the breakdown of, their marriage. It is considered better, in the present circumstances, for the Spouse to have control over the funds being transferred.
14. To the best of your knowledge, none of the issues involved in this ruling:
i) relate to an earlier return of the Taxpayer or the Spouse or any person related to the Taxpayer or the Spouse;
ii) are being considered by a tax services office or tax centre in connection with a previously filed tax return of the Taxpayer or the Spouse or a person related to the Taxpayer or the Spouse;
iii) are under objection by the Taxpayer or the Spouse or a person related to the Taxpayer or the Spouse;
iv) are before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; and
v) are the subject of a ruling previously issued by the Directorate.
Provided the above statement of definitions and abbreviations, facts and proposed transactions are accurate and constitute a complete disclosure of all relevant details, and provided the Agreement is amended and the transfer is effected as proposed, we rule as follows:
A. Subsection 146(16) of the Act will apply to the transfer made in accordance with 5(c) above.
This ruling is given subject to the limitations and qualifications set forth in the Agency's Information Circular 70-6R5 dated May 17, 2002, and is binding upon the Agency provided the proposed transfer is undertaken by XXXXXXXXXX.
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2002
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2002