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.
Principal Issues:
Whether attribution rules in 74.1(1) apply to total amount withdrawn from an RRSP where individual gives money to spouse and spouse contributes money to RRSP and takes the deduction.
Position TAKEN:
Yes.
Reasons FOR POSITION TAKEN:
The money is property transferred to the spouse; the RRSP is property substituted for the money; and the amounts withdrawn from the RRSP are income from property. But no further attribution for income earned on reinvestment of the 146(8) income.
XXXXXXXXXX 941179
Attention: XXXXXXXXXX
May 31, 1994
Dear Sirs:
Re: Registered Retirement Savings Plan (RRSP)
This is in reply to your letter of April 15, 1994, in which you ask whether section 74.1 of the Income Tax Act (unless as otherwise stated all references to this statute are to the Income Tax Act S.C. 1970-71-72, c. 63 as amended, consolidated to June 10, 1993 - the "Act") would apply where:
an individual transfers cash to a spouse for no consideration,
the spouse contributes the cash to an RRSP of which the spouse is the annuitant,
the spouse claims the contribution deduction pursuant to 146(5) of the Act, and
some time later the spouse withdraws the money and that amount is included in the spouse's income pursuant to subsection 146(8) and paragraph 56(1)(h) of the Act.
It is our view that the spouse's interest in the RRSP is "property substituted for" the cash. The total amount received out of an RRSP is income pursuant to subsection 146(8) and paragraph 56(1)(h) of the Act; these provisions make no distinction between the amounts which represent the original contribution and the amounts representing the accrued income earned on the contribution. As a consequence, the total amount received out of the RRSP is income from the substituted property and, pursuant to subsection 74.1(1) of the Act, will be deemed to be the income of the individual and not the income of the spouse.
Subsection 74.1(1) of the Act will not apply to income earned on the reinvestment of the amounts withdrawn from the RRSP. See paragraph 6 of Interpretation Bulletin IT-511R ("Interspousal and Certain Other Transfers and Loans of Property").
The foregoing comments are an expression of opinion only and are, therefore, not binding on the Department. We trust, however, that they are helpful.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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