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.
XXXX G.D. Middleton (613) 957-3498
October 6, 1986
Dear XXXX
We are writing in reply to your letter of June 12, 1986 concerning cash overdrafts which may arise in a Self-Directed Registered Retirement Savings Plan ("RRSP").
Such an overdraft may exist for only a short period of time. For example, a RRSP may have a temporary cash overdraft for a few days because the proceeds from the sale of certain investments have not been received at a time when the RRSP is required to make settlement on the acquisition of other new investments.
Provided that the overdraft described above is covered without undue delay and does not have the character of drawing on a line of credit, it is our view to regard this as a "technical overdraft" which does not constitute "borrowing money" or "using RRSP property as security for a loan" for the purposes of paragraph 146(4)(a) or 146(10)(b) of the Income Tax Act (the "Act"), respectively.
However, in situations where the facts indicate that the trustee and RRSP have clearly entered into arrangements covering significant long term overdraft balances, line of credit limits, interest charges on overdraft balances, the use of RRSP property as collateral, etc., it is our opinion that the provisions of paragraph 146(4)(a) or 146(10)(b) of the Act would be applicable.
If it is determined that RRSP property is used as security for a loan, the fair market value of the property used as security at the time it commenced to be so used must be reported on form T4RSP Supplementary for the taxpayer who is the annuitant under the RRSP and included in computing his income pursuant to subsection 146(10) of the Act.
Where the RRSP property is no longer used as security (i.e. the overdraft loan is repaid), a negative amount should be reported on the T4RSP Supplementary for the annuitant and deducted in computing his income pursuant to subsection 146(7) of the Act. The annuitant's maximum RRSP contribution, as determined under subsection 146(5)(b) of the Act, will not be affected by the negative amount calculated under subsection 146(7) of the Act.
We trust the above comments will be of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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