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:
When is "adjusted cost base" relevant to transfer of properties from, to and between registered plans.
Position TAKEN:
All transfers occur at fair market value with one exception.
Reasons FOR POSITION TAKEN:
It's the law - exception is administrative position taken in IT-412R, para. 7.
XXXXXXXXXX 950190
Attention: XXXXXXXXXX
April 28, 1995
Dear Sirs:
Re: Transfers from and to Registered Plans
This is in reply to your facsimile transmission of January 23, 1995, in which you refer to the recording of the adjusted cost base of properties transferred to, from and between registered plans such as Registered Retirement Savings Plans (RRSP's) and Registered Retirement Income Funds (RRIF's).
Your question was very general and we are not sure what difficulties you are encountering in relation to the requirements of the Income Tax Act (the "Act").
Whenever amounts are contributed in, purchased by, or transferred to, a registered plan, the gift, purchase or transfer is recorded at fair market value. For example, if a transfer on marriage breakdown from the annuitant's RRSP to the spouse's RRSP or RRIF occurs in accordance with subsection 146(16) of the Act, the value of a non-cash transfer is recorded at the fair market value of the property. Likewise, if an annuitant withdraws property from a non-registered account, such as mutual fund units, and contributes or sells the properties to a registered plan, the transaction is recorded at fair market value.
You also refer to the "deregistration" of an RRSP. In this case, the property is either transferred to another registered plan prior to the deregistration or the property is paid out to the annuitant and, again, the transaction is recorded at fair market value.
The "cost amount" (defined in subsection 248(1) of the Act) of a property is of relevance in connection with registered plans only with respect to the Part XI tax on excessive foreign property. "Cost amount" is defined to mean, in respect of a capital property other than a depreciable property, the "adjusted cost base" (defined in subsection 248(1) of the Act) of the property. In order to calculate the Part XI tax, the trustee of a registered plan subject to the tax (i.e. those plans identified in section 205 of the Act) must keep a record of the cost amount of all foreign and non-foreign property contributed in, or purchased by, the registered plan. However, when the registered plan disposes of the property, whether by transfer to another registered plan or by sale or payment out to a non-registered plan or the annuitant, both the transferor and transferee will record the transfer, or disposition and acquisition of the property at its fair market value.
The only exception to this rule that the transaction is shown at fair market value is in the circumstances where all the property in an annuitant's RRSP trust is transferred to another RRSP trust of the same annuitant. In these circumstances, the Department does not treat the transaction as a disposition/acquisition for purposes of subsection 206(1) and (2) of the Act, and the transferor trust's adjusted cost base of the transferred capital properties becomes the transferee trust's adjusted cost base (see paragraph 7 of Interpretation Bulletin IT-412R entitled "Foreign Property of Registered Plans").
Although the foregoing comments are not binding on the Department, we trust they are of assistance.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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