19 June 1996 External T.I. 9620275 - PROP TRF FROM SPOUSAL TO NON-SPOUSAL

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 property be transferred from a spousal plan to a non-spousal plan?

Position:

yes but non-spousal becomes a spousal plan.

Reasons:

No way out of legislation although we allow info to cease to be reported administratively

		962027
XXXXXXXXXX	M.P. Sarazin

Attention: XXXXXXXXXX

June 19, 1996

Dear Sirs:

Re: Spousal Registered Retirement Savings Plans

This is in reply to your letter dated May 31, 1996, wherein you requested our views with respect to the transfer of property from a spousal registered retirement savings plan to a non-spousal registered retirement savings plan in the event of the death of the contributor or a divorce.

Comments

The provisions of subsection 146(16) of the Income Tax Act (the Act") allow for the transfer of property from a registered retirement savings plan ("RRSP") before the maturity of the plan to another RRSP or registered retirement income fund ("RRIF") under which the transferor is the annuitant. Therefore, where an annuitant under a spousal RRSP is also the annuitant under a non-spousal RRSP, the transfer of property between the two RRSPs is allowed under the Act.

A "spousal plan" is defined in subsection 146(1) of the Income Tax Act (the "Act") to mean

(a)a registered retirement savings plan

(i)to which the taxpayer has, at a time when the taxpayer's spouse was the annuitant under the plan, paid a premium, or

(ii)that has received a payment out of or a transfer from a registered retirement savings plan or a registered retirement income fund that was a spousal plan in relation to the taxpayer, or

(b)a registered retirement income fund that has received a payment out of or a transfer from a spousal plan in relation to the taxpayer.

Since a spousal plan includes any RRSP or RRIF that has received property as a result of a transfer from a spousal plan, any transfer of property from a spousal plan to a non-spousal plan will result in the transferee plan becoming a spousal plan for purposes of the Act. Even though the attribution rules for RRSPs in subsection 146(8.3) of the Act and subsection 146.3(5.1) of the Act for RRIFs would no longer apply where there has been a divorce or where the contributor to the spousal plan has died, there is no provision in the Act that allows for the conversion of a spousal plan into a non-spousal plan.

A form T2033 is used to record a direct transfer under paragraph 146(16)(a) or 146.3(2)(e) of the Act and the instructions for the form require the disclosure of whether the property transferred is from a spousal plan. The fact that a transferee plan will become a spousal plan is inconsequential because the attribution rules would not apply.

With regards to the reporting of amounts ultimately paid out of a spousal plan, we would refer you to pages 7 and 10 of the 1995 T4RSP and T4RIF Guide where the Department has stated that a "NO" could be inserted in box 24 (spousal plan identification box) of the T4RSP and T4RIF and boxes 36 and 38 (contributor information boxes) of the T4RSP and T4RIF could be left blank where:

(a)at the time of the payment, the spouses were separated and living apart because of the breakdown of their relationship;

(b)the contributor spouse died during the year the payer made the payment or is considered to have made it; or

(c)at the time of the payment, either the annuitant or the contributor spouse was a non-resident.

We trust the above comments will be of assistance to you.

Yours truly,

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