28 June 1988 Income Tax Severed Letter 7-2949 - [Proposed amendment to a RRIF]

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.

MEMORANDUM

DATE June 28, 1988

TO: Registered Pension and Deferred Income Plans Division

FROM: Financial Industries Division Peter K. Noack 957-8963

Attention: Cecilia Lam ----------------------

SUBJECT:XXXX

We reply to your memorandum of June 6 concerning a proposed amendment to a RRIF issued by XXXX You ask whether subsection 4(1) of the amended plan would contravene the requirement in paragraph 146.3(2)(g) that no benefit that is conditional on the existence of the plan may be extended to the annuitant.

XXXX agrees that the wording of subsection 4(1) of the amended plan is not clear. They will send you a revised version of the subsection. Nevertheless, the intent of the subsection is to provide a guaranteed return of the accumulating market value of the property transferred to the plan and allocated to a segregated fund, the value of the assets of which fluctuates with the market. The guaranteed amount will be paid on the final income date, if the plan is then in force. You are concerned because the guaranteed amount will be paid only to those planholders who do not surrender their plans before the final income date.

Paragraph 146.3(2)(g) reads in part:

(g) the fund requires that no benefit or loan, other than

(i) a benefit the amount of which is required to be included in computing the annuitant's income,

that is conditional in any way on the existence of the fund may be extended to the annuitant or to a person with whom he was not dealing at arm's length;

All amounts received by a taxpayer in a year out of or under a RRIF must be included in the taxpayer's income for that year by virtue of subsection 146.3(5). From the above it follows that a benefit in the form of a guaranteed amount paid on the final income date under the amended RRIF proposed by XXXX is a benefit described as an exception in subparagraph 146.3(2)(g)(i). Therefore, the provision for payment of a guaranteed amount as intended by subsection 4(1) of the amended plan does not contravene the condition for acceptance for registration in paragraph 146.3(2)(g).

for Director Financial Industries Division Rulings Directorate