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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sir\Madam
RE: Registered Retirement Savings Plan ("RRSP")
This is in reply to your letter of February 15, 1993 regarding certain assignments of RRSP proceeds taken as security for loans granted for the purpose of making RRSP contributions and restrictions on the transfer of RRSP property unless and until the annuitant repaid all loans owing to the RRSP issuer\creditor.
Written confirmation of the tax implications inherent in a proposed transaction is given by this Directorate only where the proposed transaction is the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular transactions are completed, the inquiry should be addressed to the relevant District Taxation Office. We offer, however, the following general comments.
In order to definitively reply to your enquiry it would be necessary to have the copy of the draft loan arrangement and a copy of the related RRSP. Other required information would include the terms of the related loan and details of the relationship between the issuer of the RRSP and the lender. In processing a relevant advance ruling request, issues that we would be considering would include the following:
1. Whether or not it could be said that an advantage has been extended to the annuitant that is conditional upon the existence of the RRSP. If so, whether or not the relationship between the issuer and the lender is such that it could be said that the issuer is party to the extension of the advantage with the result that the penalty under subsection 146(13.1) of the Income Tax Act (the "Act") would be exigible.
2. Whether or not it could be said that the loan is made on the security of a right under the RRSP such that subsection 146(13) of the Act would deem there to be a new plan substituted for the RRSP.
3. If 146(13) applies, whether or not it could be said that the new plan does not comply with the requirements of section 146 of the Act for registration with the result that subsection 146(12) of the Act would apply to include in the annuitant's income the fair market value of the plan.
Paragraph 146(10)(b) of the Act applies when any property of a trusted RRSP is used as security for a loan. A term in a RRSP plan which restricts the transfer of RRSP property prior to maturity is not prohibited by the Act.
We trust our comments are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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