20 August 1993 External T.I. 9321945 F - Transfer From Insurance 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.

XXXXXXXXXX  

Dear XXXXXXXXXX

RE:  Transfer of Funds from Registered Retirement Savings Plan (RRSP)

This is in reply to your letter of June 14, 1993, which was forwarded to us by the Registered Plans Division. You enclosed your letter of April 22, 1993, to the Victoria District Office and the reply of May 28, 1993, from the Surrey Taxation Centre.

You ask two questions concerning the transfer of funds from an insurance policy which is registered as an RRSP. You also advise that during the period XXXXXXXXXX to date (the period during which the policy has been registered as a retirement savings plan) your claims for deductions for your payment of premiums to the RRSP were disallowed for XXXXXXXXXX

If you wish to keep the policy in force but deregister it, the amount that can be transferred on a tax-deferred basis to another RRSP of which you are an annuitant is the greater of:

(a)     the total of the amounts which have been deducted under subsection 146(5) and (5.1) in respect of the policy, and

(b)     the total of the cash surrender value of the policy and the accumulated dividends then standing to your credit.

If, on the other hand, you wish to surrender the policy, the fair market value of the RRSP property which can be transferred directly to another of your RRSP's is the cash surrender value plus any accumulated dividends.

Regardless of the option you choose, any retirement income which is later received out of a matured RRSP or a registered retirement income fund (RRIF) will be fully taxable at the time of receipt.

You ask whether the amount "deemed" an RRSP can be reduced to reflect the fact that some of the premiums were not deducted. When the savings portion of an insurance policy is registered as a retirement savings plan, all premiums paid and identified by the insurance company or agent as premiums for the RRSP portion and the earnings thereon become part of the RRSP, whether or not deductions can be or are taken for such premiums. When the insurance policy is surrendered or otherwise deregistered, the amount taxable as an RRSP benefit or the amount eligible for a tax-deferred transfer to another RRSP or RRIF is the amount identified in the third paragraph above. Even though all the premiums may not have been deducted or deductible, some benefit has accrued to you inasmuch as the earnings on these premiums remained in the RRSP on a tax-sheltered basis.

With respect to the savings accumulated in your policy for the period from XXXXXXXXXX, if these amounts formed part of the contract which was registered in XXXXXXXXXX as an RRSP, then the value associated with the savings will be treated as RRSP property. The property can either be transferred on a tax-deferred basis to another RRSP or a RRIF, or taxed when received by you. Your insurance company or agent will be able to advise you if these pre-registration funds formed part of the property that was held under the contract registered as the RRSP.

If these savings were segregated from the property registered as an RRSP, then they will be treated as a separate insurance policy. If your insurance company or agent confirms that the property accumulated from XXXXXXXXXX forms part of a non-RRSP insurance policy, please contact the Vancouver District Office for further information concerning the income tax consequences upon its disposition.

We trust these comments assist.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate