8 June 2004 External T.I. 2004-0070891E5 - Transfer from a RRIF to a RRSP

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.

Principal Issues: 1.Whether funds may be transferred from a RRIF to a RRSP.

2. Are RRSP contributions deductible in arriving at the "adjusted taxable income" under the AMT rules?

Position: 1. The amount in excess of the "minimum amount" may be transferred from a RRIF to a RRSP.

2. Yes.

Reasons: 1. As per RRIFs rules in subsection 146.3(2) of the Act.

2. As per paragraph 127.52(1)(a).

XXXXXXXXXX 								2004-007089
C. Lalonde
June 8, 2004

Dear XXXXXXXXXX:

Re: Transfer of Funds from a Registered Retirement Income Fund (an "RRIF") to a Registered Retirement Savings Plan (an "RRSP")

This is in response to your letter of February 19, 2004 concerning the possibility of transferring the funds from your RRIF back to an RRSP without penalty. You also enquired about the application of the alternative minimum tax ("AMT") to the transfer.

Our Comments

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 Revenue Agency ("CRA"). All publications referred to herein can be accessed on the CRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

A RRIF is a retirement income fund ("RIF") that is accepted for registration under the rules set out in subsection 146.3(2) of the Income Tax Act (the "Act"). Under these rules, the RRIF carrier, for example the financial institution who set up the RIF, must pay a "minimum amount" to the annuitant every year. The "minimum amount" is nil in the year in which the RRIF is set up but for each subsequent year, the "minimum amount" will be computed by reference to the fair market value of the RRIF property at the beginning of the year and a prescribed factor. An annuitant must include in income the "minimum amount" received every year pursuant to subsection 146.3(5) and paragraph 56(1)(t) of the Act.

There is no provision under the Act that allows for the reversal of a transfer of property made to a RRIF back to an RRSP. However, a RRIF annuitant can have an excess amount from his or her RRIF (i.e., an amount in excess of the minimum amount required to be paid for the year) transferred directly to an RRSP under which he or she is also the annuitant.

The total amount transferred from the individual's RRIF has to be included in the income of the individual for the year of receipt pursuant to subsection 146.3(5) and paragraph 56(1)(t) of the Act. A deduction is available to the individual under paragraph 60(l) of the Act for the excess amount transferred to an RRSP. Form T2030, Direct Transfer Under Subparagraph 60(l)(v), can be used by the RRIF annuitant to instruct his or her RRIF carrier to make the direct transfer.

You may find more information on the transfer of funds from a RRIF to an RRSP in our Interpretation Bulletin IT-528 - Transfers of Funds Between Registered Plans. This bulletin and Form T2030 are available from your local tax services office or on the internet at: http://www.ccra-adrc.gc.ca/formspubs/menu-e.html.

You also enquired about the application of the AMT to the above transfer. Under the AMT, an individual is required to add back a number of tax preferences to taxable income. An individual is required to compute his AMT liability, compare this with his regular tax liability and then pay the higher of the two amounts. Most individuals subject to AMT are able to recoup the additional tax through a seven-year carry forward mechanism. With respect to RRSPs, deductions for RRSP contributions are not denied in the computation of taxable income for AMT purposes, i.e., in computing an individual's AMT liability, the individual is allowed to deduct amounts paid into an RRSP to the same extent that these amounts are deductible in computing the individual's regular tax liability.

We trust that these comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch