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:
Can a minor child receive annuity payments during the year in which he or she is 18 but before the day he or she turns 19 where an annuity is purchased pursuant to 60(l)(ii)(B)?
Position: Yes.
Reasons: The term "age in whole years" as used in clause 60(l)(ii)(B) means age in completed years.
XXXXXXXXXX 2003-000358
G. Kauppinen
April 2, 2003
Dear XXXXXXXXXX:
RE: Transfer of refund of premium under RRSP to minor child
We are writing in reply to your facsimile transmission dated February 18, 2003 wherein you requested our general views regarding the application of clause 60(l)(ii)(B) of the Income Tax Act (the "Act").
Under clause 60(1)(ii)(B) of the Act, a refund of premiums under an RRSP may be transferred to an annuity for a fixed term not exceeding 18 years minus the minor child's age in whole years at the time the annuity is acquired. You are of the view that the minor child can receive annuity payments after his or her 18th birthday but all of the payments have to be received before his or her 19th birthday.
In our opinion, the meaning of the phrase "age in whole years" as used in clause 60(l)(ii)(B) of the Act means how old the child is in completed years. That is, if the minor child is 12 years and 1 day old or 12 years and 364 days old at the time the annuity is acquired, the number "12" is used in both instances for purposes of the calculation in clause 60(l)(ii)(B) of the Act. Consequently, the annuity cannot exceed a fixed term of 6 years.
In a case where a minor child's birthday is on January 1 and on December 30 of the year the child is 12 an annuity is purchased for his or her benefit, the term of the annuity must mature on or before the child is 18 years and 364 days old i.e. December 30 of the year in which the child is 18 years old. Consequently, the minor child will be eligible to receive payments under the annuity before December 31 in his or her 18th year.
We trust that these comments will be of assistance.
Yours truly,
Mickey Sarazin, C.A.
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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