19 November 1991 Ruling 9117333 F - Deemed Receipt Of Refund Of Premiums Under RRSP On Death

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.

3-911733

Dear Sirs:

Re:  146(8.1) of the Income Tax Act (the "Act")

This is in reply to your letter of June 21, 1991 in request of our opinions on the application of Subsection 146(8.1) of the Act to a specific fact situation as detailed in your letter.

Since the subject matter of your letter pertains to an actual proposed settlement of the estate, it must be the subject matter of a request for an advance income tax ruling requested in accordance with the procedures set out in the Department's Information Circular IC 70-6R2.  We therefore are unable to provide you with any specific comments to your request at this time.  A copy of IC 70-6R2 is enclosed for your reference.

While we can not respond to your concerns at this time, we can offer you the following observations:

1.     When an otherwise valid election under subsection 146(8.1) of the Act is made with respect to an amount received by an estate from an RRSP it has the effect of deeming the amount to have not been received by the estate but to have instead been received directly by the electing beneficiary of the estate with the result that the amount must be included in the beneficiary's income under subsection 146(8) of the Act for the same calendar year in which it was initially received by the estate.  However, if the provision is to have its desired effect, which is to allow the beneficiary to transfer an equal amount under the provisions of paragraph 60(1) of the Act to an RRSP as a refund of premiums, a contribution of the amount or its equivalent must be made to the beneficiary's RRSP within the same calendar year or within 60 days thereafter.  If this is not done, the practical benefits of making the election are lost.

     A deduction under paragraph 60(1) of the Act can not be allowed on a retroactive basis for amounts transferred to an RRSP during a subsequent period.  Therefore if an amount on which an election is expected to be made is not awarded from an estate to a surviving spouse for some period of time beyond that permitted under paragraph 60(1), the beneficiary may not be able to benefit from the election. Furthermore, if the beneficiary were to contribute an amount from other funds to his or her RRSP in anticipation of a subsequent award, the provisions of Part X.l of the Act which provide for a tax on excessive contributions to an RRSP could have a significant impact.

2.     The rules relating to the designation of RRSP beneficiaries lies in contract, trust or succession law or a combination of these laws and they are all subject to provincial jurisdiction.  Nothing within the provisions of the Act will override or vary their application.  In consequence, for income tax purposes such as the application of subsections 146(8.1) or (8.8) cognizance of the relevant provincial legislation must be taken before the sections of the Act may properly be applied.

     As provided in paragraph 6 of Interpretation Bulletin 500 as referred to by you in your letter, and applicable to the application of 146(8.1) of the Act by virtue of paragraph 10 of the bulletin, an election under that subsection may be made by a deceased's legal representative and a surviving spouse if the laws governing intestacy provide the spouse with a right to the amounts paid out of an RRSP or if, by virtue of a court order in relation to an estate made pursuant to a law of a province providing for the relief or support of dependents, the spouse becomes entitled to receive either the entire estate or the estate's interest in the plan.  This same result can not occur where the entitlements are not received as a result of a court order.

We trust these comments will be satisfactory to your needs.

Yours truly,

for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch