13 July 1989 Ministerial Letter 58288 F - Transfer from 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.

July 13, 1989

Dear Sirs:

This is in reply to your letter dated June 26, 1989, and is further to yours of May 5 and ours of May 18, 1989, in which you requested our views concerning the application of paragraphs 60(1) and 146(1)(i.1) of the Income Tax Act ("Act").

In your letter of May 5, 1989, you questioned specifically whether the term of a term certain annuity acquired with funds derived from an RRSP is determined under subparagraph 146(1)(i.1)(ii) of the Act in all cases, and we answered in effect that this need not be true in all cases.  Assume that a partial commutation payment is made out of the retirement income of an RRSP say two years after maturity (as permitted under subparagraph 146(2)(b)(ii) of the Act).  Such a payment can be used to acquire a term certain annuity for a shorter term under clause 60(1)(ii)(B) of the Act than one determined at maturity of the RRSP under subparagraph 146(1)(i.1)(ii) therein.

We agree that where one commutes a term certain annuity and uses the funds derived therefrom to acquire another term certain annuity as provided for under clause 60(1)(ii)(B) of the Act then the age 90 cap for determining the annuity's term remains.

You advised that several financial institutions may be either

(i)     issuing term certain annuities that do not comply with the provisions of section 146 of the Act, or

(ii)     transferring commutation payments into annuities that do not comply with the provisions of paragraph 60(1) of the Act.

We would be interested in learning the names of the financial institutions in question, and in receiving detailed information about their annuity contracts that would assist this Department in determining if an audit action is required.  We suggest that it would be inappropriate at this time to indicate that we would assess anyone.

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

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate