13 July 1994 External T.I. 9415735 - RRSP HOMEBUYERS PLAN TRANSFERS BETWEEN RRSPS

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Principal Issues:Can an amount transferred from a RRIF to an RRSP be withdrawn under the Home Buyers Plan without any problems?

Position TAKEN:If other premiums were paid within 90 days of withdrawal and before the transfer a problem could occcur.

Reasons FOR POSITION:Application of draft legislation

XXXXXXXXXX		5-941573

Attention: XXXXXXXXXX

July 13, 1994

Dear Sirs:

Re: Draft Legislation on the Home Buyers Plan

This is in reply to your letter of June 16, 1994, in which you asked if amounts contributed to an RRSP and immediately transferred to a RRIF could be transferred back to the RRSP and withdrawn under the new Home Buyers Plan as proposed in draft legislation released on March 28, 1994.

In general, there are two kinds of contributions that can be made to an RRSP. The first is the `normal' annual contribution based on a contributor's earned income. The second is the amount that can be transferred to an RRSP from certain other plans or arrangements such as a transfer from a RRIF. Both types of contributions are defined as "premiums" under the Income Tax Act (the "Act").

The provisions of the Act allowing transfers from a RRIF to an RRSP are not directly affected by the draft amendments to the Home buyers plan and a deduction under those provisions will not be denied if the amounts transferred are withdrawn under the Home Buyers Plan.

On the other hand, the deduction of `normal' contributions is limited because a deduction can not be made under the provisions allowing annual contributions, for any "premium" that would be considered to be withdrawn under the Home Buyers Plan less than 90 days after it was paid if earnings of the RRSP are considered to be withdrawn first and the premiums are considered to be withdrawn in the order in which they were received. This could mean that a deduction for premiums paid to an RRSP, transferred to a RRIF and subsequently transferred back to the RRSP could be limited if they are withdrawn under the Home Buyers Plan. This can be clarified in the following example.

Assume a contributor to an RRSP pays a premium of $30,000 to an RRSP on June 1, 1994, transfers this to a new RRIF on June 2, 1994 and transfers it back to the RRSP on June 3. Also assume that on June 4, the annuitant withdraws $20,000 under the Home Buyers Plan.

In this case, the premiums paid to the RRSP in the year would be 60,000. This is the total of the normal contributions and the amount transferred from the RRIF.

On filing his or her tax return, the contributor would report the $30,000 transferred to the RRSP as income but could claim a deduction of $30,000. However, the contributor could not claim any amount for normal contributions. For this purpose the amount deductible is calculated as follows:

Premiums paid in the year as normal contributions:	$30,000
Premiums paid as a transfer from the RRIF:		 30,000
Total premiums: 	 	$60,000
less:	amount deducted under 60(l)	$30,000	

amount considered to be withdrawn
under the Home buyers plan:	 30,000	 60,000

Normal contribution deduction allowed:		  nil

The above comments are based on our understanding of the draft legislation as presently proposed. They apply in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate