26 July 1995 External T.I. 9519455 - RRSP SPOUSAL PLAN

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:

Circumstances under which RRSP status as "spousal plan" can be removed.

Position TAKEN:

On death or on deregistration of plan.

Reasons FOR POSITION TAKEN:

Routine.

XXXXXXXXXX 951945

Attention: XXXXXXXXXX

July 26, 1995

Re: Spousal Plan Status

This is in reply to your facsimile transmission of July 21, 1995, in which you ask in what circumstances an issuer need no longer treat a registered retirement savings plan (RRSP) as a "spousal plan" as defined in subsection 146(1) of the Income Tax Act (the "Act"). Your concern would relate to the income inclusion rule under subsection 146(8.3) of the Act and the exception therein with respect to a spouse who is living separate and apart from the RRSP annuitant by reason of the breakdown of their marriage.

Subsection 146(1) of the Act defines a "spousal plan" as, among other things, an RRSP to which a taxpayer has, at a time when the taxpayer's spouse was the annuitant under the plan, paid a premium. In addition to a person who is married to the taxpayer, paragraph 252(4)(a) defines a "spouse" of a taxpayer at any particular time to include a person of the opposite sex who cohabits with the taxpayer in a conjugal relationship and is, basically, either the parent of the taxpayer's child or has cohabited with the taxpayer throughout a 12-month period ending before that time.

Once an RRSP meets the definition of a "spousal plan", it does not lose this status. The status arises at the time the premium is paid to a spouse's RRSP; a subsequent change in the relationship of the two parties will not affect the RRSP for purposes of this definition in subsection 146(1) of the Act.

The income inclusion rule does not apply, however, where at the time an amount is received out of the spousal RRSP, the parties are living separate and apart due to a breakdown of their marriage or, as specified by paragraph 252(4)(b) of the Act, their conjugal relationship. In this case, the annuitant will include the amount received out of the RRSP in income pursuant to subsection 146(8) of the Act. There will be no attribution of income to the person who paid the premium.

The RRSP issuer is required to issue a T4RSP Supplementary to the annuitant of the RRSP with respect to any amounts received out of the RRSP. If the spouses are living separate and apart because of the breakdown of their marriage, the additional information concerning the contributor spouse (i.e. name and SIN) is not required. (See "1994 T4RSP and T4RIF Guide", Chapter 9 at Boxes 24, 36 and 38.)

In our view, the RRSP issuer should maintain records pertaining to the status of a plan as a spousal plan until the plan is deregistered or the taxpayer or annuitant has died (see explanation of consequences on death below). Spouses may reconcile, even after a divorce, and the income attribution rule could apply again with respect to amounts received out of the RRSP.

If the issuer is satisfied that, at the time an amount is received out of the spousal plan, the contributor and annuitant are no longer living together due to a breakdown of their marriage or conjugal relationship, then the additional information on the T4RSP slip need not be provided. Satisfactory evidence could include a copy of the decree absolute or separation agreement, but note that documentary evidence is not required by the Act. There is, in any event, no requirement that the issuer accept any proof provided with respect to a marriage/conjugal relationship breakdown. If there is a dispute, it would be acceptable to continue to insert the additional information on the T4RSP slip and request the taxpayers to contact the tax services office should the contributor wish to invoke the exception contained in subsection 146(8.3) of the Act.

With respect to the situation where the taxpayer dies, the RRSP issuer is free to expunge the spousal plan information from its files since there can be no attribution to the taxpayer for years following the year of the taxpayer's death, and for the year of death, paragraph 146(8.7)(a) of the Act provides that the attribution rules do not apply.

With respect to the annuitant's death, the RRSP issuer need no longer maintain the spousal plan information since subsection 146(8.8) of the Act deems the annuitant to have received an amount equal to the fair market value of the (unmatured) RRSP at the time of death, and paragraph 146(8.7)(e) of the Act provides that the attribution rules will not apply to that amount.

We trust this information will assist you. Should you have any questions concerning the guides and information slips relating to registered retirement plans and funds, please contact the T1 Supplementary Guides Division, Client Assistance Directorate of this department, Ottawa, Ontario K1A 0L8. Questions concerning technical interpretations of the Income Tax Act may be directed to us.

Yours truly,

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