19 April 1995 External T.I. 9431235 - ATTRIBUTION RULES AND 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.

Principal Issues:

Whether 74.1(1) applies to amount withdrawn from an RRSP where an individual gives money to spouse who contributes money to his\her RRSP and takes the deduction.

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

RRSP is arrangement described in definition of retirement savings plan. Such arrangements are property under 248(1) and property substituted for the money. Amount taxed pursuant to 56(1)(h) represents income from property.

		5-943123
XXXXXXXXXX	G. Martineau

Attention: XXXXXXXXXX
April 19, 1995

Dear Sirs:

Re: Registered Retirement Savings Plan ("RRSP")

This is in reply to your letter received on November 30, 1994 in which you ask us to clarify our view expressed in our opinion letter 941179 of May 31, 1994 on the application of section 74.1 of the Income Tax Act (the "Act") where the contribution to an RRSP of an individual is funded with cash transferred from the individual's spouse.

An interest in an RRSP represents one of the arrangements described in the definition of retirement savings plan pursuant to subsection 146(1) of the Act. Consequently, it is our view that an interest in an RRSP is "property substituted for" the cash because each arrangement that is a retirement savings plan is the property substituted.

It is our view that for the purposes of the Act other than subdivision b of Division B thereof, the expression "income from property" should be given its ordinary meaning. With this in mind and having regard to the wide scope of the definition of "property" in subsection 248(1) of the Act, it is our opinion that the expression "income from property" would, for the purposes of subsection 74.1(1) of the Act, include the total amount received out of an RRSP that is income pursuant to subsection 146(8) and paragraph 56(1)(h) of the Act.

We wish to bring to your attention that the exclusion in paragraph 74.5(12)(a) of the Act would not be necessary if the attribution rules did not apply to RRSP income; i.e., income taxed pursuant to paragraph 56(1)(h) of the Act.

As mentioned in paragraph 6 of Interpretation Bulletin IT-511R and in our previous letter, the attribution rules do not apply to income earned on the reinvestment of the amounts withdrawn from an RRSP.

The Department has no guidelines regarding the application of the attribution rules where an RRSP includes premiums financed with an annuitant's funds and his\her spouse'_ funds. However, we can assure you that the Department will accept all reasonable allocating method in order to determine the portion of the RRSP proceeds subject to the attribution rules.

The above comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust, however, that they are of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch