24 February 1994 External T.I. 9403535 - TAX-FREE TRANSFER OF LIF PAYMENTS TO SPOUSE'S 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY

DOCUMENT TYPE:

Opinion

Principal Issues:

Whether LIF purchased with registered pension plan funds considered to be a paragraph 254(a) contract with the result that periodic payments out of LIF eligible for 60(j.2) roll.

Position TAKEN:

No roll if LIF is a RRIF; roll if LIF is not a RRIF and rights under LIF are rights provided for in pension plan.

Reasons FOR POSITION TAKEN:

Exclusionary clause in paragraph 60(j.2); wording of 254(a).

LEGAL:

FINANCE OPINION:

JURISPRUDENCE:

RCT PUBLICATIONS:

HAA NUMBER:

7278-1

XXXXXXXXXX 940353

Attention: XXXXXXXXXX

February 24, 1994

Dear Sirs:

Re: Purchase of "life income fund" (LIF) With Funds from Registered Pension Plan:
Applicability of Paragraphs 254(a) and 60(j.2) of the Income Tax Act (the "Act")

This is in reply to your letter of February 7, 1994, in which you ask whether the transfer to a spouse's registered retirement savings plan of periodic payments out of a LIF can satisfy the conditions of paragraph 60(j.2) of the Act. In the situation you describe, members of a registered pension plan have the option of purchasing a LIF with the actuarial value of their pension upon retirement.

Written confirmation of the tax implications inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. The following comments are, therefore, of a general nature only and are not binding on the Department.

As we understand it, a LIF which meets the requirements of a registered retirement income fund (RRIF) is a prescribed retirement savings arrangement for purposes of the portability provisions of the Ontario Pension Benefits Act (RSO 1990, c.P-8).

Paragraph 60(j.2) of the Act permits a tax-free transfer to a spouse's registered retirement savings plan of

"...amounts (other than amounts paid out of or under a ... registered retirement income fund that by reason of section 254 are considered to be amounts paid out of or under a registered pension plan)...".

Therefore, periodic payments out of a LIF which is also a RRIF under the Act will not qualify for the transfer under paragraph 60(j.2) of the Act. If, however, the LIF is not registered under the Income Tax Act and the rights provided for in the LIF are rights provided for in the registered pension plan, then periodic payments out of the LIF can be transferred tax-free pursuant to paragraph 60(j.2).

Yours truly,

for Director
Financial Industries Division
Rulings Directorate