15 December 1992 Income Tax Severed Letter 9232141 - Transfers RPP to Other Plans and Annuities

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.

ISSUE SHEET

DATE December 15, 1992

FILE: E923214

TAXPAYERS XXXXXXXXXX

REP: XXXXXXXXXX

PER: same

TOPIC: transfers of pensions under 60(l) on death of beneficiary

ISSUE:application of 60(1)(v)(B.1)(II)

ANALYSIS: SPECIAL NOTE: please read issue sheet and reply to
file 923041 for a general discussion on this topic.

Subsection 147.3(7) allows for the direct transfer of amounts out of an RPP when they are paid in consequence of the death of the beneficiary and they are transferred to an RRSP, or another RPP. It does not provide for the direct transfer of amounts on behalf of any other person.

Subsection 147.3(12) provides rules for transfers when they are not made as provided by subsections 147.3(1) through (8) (an invalid transfer). It provides that an RPP making an invalid transfer will become a revocable plan except where an individual on whose behalf the funds are transferred can deduct the amount under either 60(j) or (j.2) or provincial legislation prevents a payment of the funds to the individual. However, subsection 147.3(12) does not provide for transfers under 60(l). Accordingly, a direct transfer of funds between plans will cause a plan to be revocable even if the transfer is to an annuity and the provisions of 60(l) would permit a deduction from income. Care must be taken in applying this provision, however, since it only refers to invalid transfers to RPPs and RRSPs It has no application to a transfer to any other plan or annuity. Therefore if an amount is transferred to an annuity, unless section 254 applies to cause the annuity to be a registered pension plan and not simply a pension plan, the provision has no application.

When an indirect transfer is made, the provisions of 147.3 do not apply and the individual can make any transfer that is available to him under the provisions of the Act. Those permitted under section 60 and in particular paragraph 60(l) permits the transfer of amounts to annuities.

LAW:

A. SECTION 147.3

(7) Transfer--Lump sum benefits on death. An amount is transferred from a registered pension plan in accordance with this subsection if the amount
• (a) is a single amount no portion of which relates to an actuarial surplus;
• (b) is transferred on behalf of an individual who is entitled to the amount as a consequence of the death of a member of the plan and who was a spouse or former spouse of the member at the date of the member's death; and
• (c) is transferred directly to another registered pension plan for the benefit of the individual or to a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)).
(9) Taxation of amount transferred. Where an amount is transferred in accordance with any of subsections (1) to (8),
• (a) the amount shall not, by reason only of that transfer, be included by reason of subparagraph 56(1)(a)(i) in computing the income of any taxpayer; and
• (b) no deduction may be made under any provision of this Act in respect of the amount in computing the income of any taxpayer.
(12) Restriction re transfers. A registered pension plan becomes a revocable plan at any time that an amount is transferred from the plan to another registered pension plan or to a registered retirement savings plan unless
• (a) the amount is transferred in accordance with any of subsections (1) to (8); or
(b) where the amount is transferred on behalf of an individual,
• (i) the amount is deductible by the individual under paragraph 60(j) or (j.2), or
• (ii) the Pension Benefits Standards Act, 1985 or a similar law of a province prohibits the payment of the amount to the individual.

B. Sec. 60(l)

Transfer of refund of premium under R.R.S.P.--the aggregate of all amounts each of which is an amount paid by or on behalf of the taxpayer in the year or within 60 days after the end of the year

• (i) as a premium under a registered retirement savings plan under which he is the annuitant, (ii) to acquire, from a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business, an annuity

(A) under which the taxpayer is the annuitant

• (I) for the taxpayer's life, or for the lives jointly of the taxpayer and the taxpayer's spouse (in this paragraph having the meaning assigned by subsection 146(1.1)), either with a guaranteed period that is not greater than 90 years minus the age of the taxpayer or the age of the taxpayer's spouse, at the time of its acquisition or without a guaranteed period, or

(II) for a term of years equal to 90 minus the age of the taxpayer or the age of the taxpayer's spouse, at the time of its acquisition, or

(B) under which the taxpayer, or a trust under which the taxpayer is the sole person beneficially interested in all amounts payable under the annuity, is the annuitant for a term of years not exceeding 18 minus the age of the taxpayer at the time of its acquisition

that does not provide for any payment thereunder except

(C) the single payment by or on behalf of the taxpayer,

(D) equal annual or more frequent periodic payments commencing not later than one year after the date of the payment referred to in clause (C), and

(E) payments in full or partial commutation of the annuity and, where the commutation is partial, equal annual or more frequent periodic payments thereafter,

or

• (iii) to a carrier as consideration for a registered retirement income fund under which the taxpayer is the annuitant

where such aggregate

• (iv) is designated by the taxpayer in his return of income under this Part for the year,
• (v) does not exceed the aggregate of

(A) the amount included in computing his income
for the year as a refund of premiums out of or
under a registered retirement savings plan under
which the taxpayer's spouse was the annuitant,

(B) the amount included in computing his income for the year as a refund of premiums out of or under a registered retirement savings plan where the taxpayer was dependent by reason of physical or mental infirmity on the annuitant under the plan,

(B.1) the lesser of

(I) the amount paid by or on behalf of the taxpayer to acquire an annuity that would be described in subparagraph (ii) if that subparagraph were read without reference to clause (A) thereof, and

(II) the amount (other than any portion thereof included in the amount determined under clause (B)) included in computing the taxpayer's income for the year as a payment (other than a payment that is part of a series of periodic payments or that relates to an actuarial surplus) received by the taxpayer out of or under a registered pension plan, or as a refund of premiums out of or under a registered retirement savings plan, as a consequence of the death of an individual, where the taxpayer is a child or grandchild of the individual, and

(B.2) the amount included in computing the taxpayer's income for the year that was received by the taxpayer as a consequence of the death of the taxpayer's spouse out of or under a provincial pension plan prescribed for the purposes of paragraph (v),

• and, where the amount is paid by a direct transfer from the issuer of a registered retirement savings plan or a carrier of a registered retirement income fund,

(C) the amount included in computing his income for the year as a consequence of a payment described in subparagraph 146(2)(b)(ii), and

(D) the portion of the amount received by him out of or under a registered retirement income fund and included in computing his income for the year by virtue of subsection 146.3(5) that exceeds the minimum amount (within the meaning assigned by paragraph 146.3(1)(b.1)) required to be paid to the annuitant in the year under that fund, and

• (vi) was not deducted in computing his income for a preceding taxation year;