11 March 2003 External T.I. 2003-0184055 - SPOUSAL RRSP STATUS FOLLOWING DEATH

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 the "spousal" designation of an RRSP be removed after the death of the contributor spouse?

Position: Yes

Reasons:

Attribution rule doesn't apply in the year of death per 146(8.7) and no attribution can occur in subsequent years, so RRSP carrier can delete spousal RRSP status..

2003-018405
XXXXXXXXXX Renée Shields
(613) 948-5273
March 11, 2003

Dear XXXXXXXXXX:

Re: Spousal registered retirement savings plan ("RRSP")

This is in response to your letter of January 16, 2003 inquiring about the status of a spousal RRSP after the death of the contributor spouse.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

The CCRA's general views regarding spousal RRSPs are contained in Interpretation Bulletin IT-307R3, "Spousal Registered Retirement Savings Plans."

Subsection 146(1) of the Income Tax Act (the "Act") defines a spousal or common-law partner plan ("spousal RRSP") as, among other things, an RRSP to which a taxpayer ("contributor spouse") has paid a premium at a time when the taxpayer's spouse or common-law partner ("annuitant spouse") was the annuitant under the plan. The status arises at the time the premium is paid to a spouse's or common-law partner's RRSP. When an RRSP meets the definition of spousal RRSP it will not lose this status and any subsequent change in the relationship of the two parties will not affect the RRSP for purposes of the definition in subsection 146(1) of the Act.

Generally, any amount received by the annuitant spouse out of the spousal RRSP is income of the annuitant spouse. This is so even though the contributor spouse may have made part or all of the contributions to the spousal RRSP.

Subsection 146(8.3) of the Act contains a special attribution rule designed to discourage the short-term use of a spousal RRSP as a means of income splitting. Generally speaking, if applicable, the attribution rule will include in the taxable income of the contributor spouse an amount withdrawn from a spousal RRSP by the annuitant spouse. It is for this reason that maintaining a record of the status of the RRSP as a spousal RRSP is important.

However, subsection 146(8.7) of the Act provides that the attribution rule does not apply in the year of the contributor spouse's death. Since no attribution to the contributor spouse can occur in the years following the year of death, the CCRA's position is that an RRSP issuer is free to expunge the spousal RRSP information from its files.

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