20 May 2015 External T.I. 2014-0539151E5 - 146(16)(b) RRSP Transfers

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: Will paragraph 146(16)(b) apply to transfers after the transferor has died?

Position: No.

Reasons: 146(16) only contemplates transfers while the annuitant (transferor) is still alive.

XXXXXXXXXX
2014-053915
P. Tsang

May 20, 2015

Dear XXXXXXXXXX:

Re: Transfers pursuant to paragraph 146(16)(b)

This letter is in reply to your correspondence of July 8, 2014, wherein you inquired about the transfer of property in accordance with paragraph 146(16)(b) of the Income Tax Act (the "Act"). In general, paragraph 146(16)(b) provides that transfers of property under an unmatured registered retirement savings plan ("RRSP") upon the breakdown of marriage or common-law partnership may be completed without any incidence of tax.

Your situation involves an individual who signed Form T2220 and submitted the request to the individual's financial institution to transfer the funds to the RRSP of their spouse or common-law partner or former spouse or common-law partner (hereinafter "spouse" encompasses spouse, common-law partner and former spouse or common-law partner). However, the individual died prior to the financial institution transferring property under the RRSP on behalf of the individual. You asked whether subsection 146(16) would apply in this instance.

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in information circular (IC)70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Paragraph 146(16)(b) permits a tax-free transfer of an amount directly from an unmatured RRSP, by the issuer of the RRSP on behalf of the individual who is the annuitant under the plan, to an RRSP or registered retirement income fund under which their spouse is the annuitant. The individual and their spouse must be living separate and apart and the transfer must be made pursuant to a court order or written separation agreement relating to a division of property in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

The Act does not have a definition for "transfer" or "transfer of property", but it is our view that, for the purposes of subsection 146(16), it only encompasses actual direct transfers of property from the individual's RRSP to the individual's spouse's RRSP while the individual is still alive. Consequently, it is our view that subsection 146(16) would not apply in your situation.

We trust that our comments will be of assistance to you.

Yours truly,

Lita Krantz, CPA, CA
for Director
Deferred Income Plans Section II
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch