10 September 1996 Internal T.I. 9628337 - CONSOLIDATING SPOUSAL AND NON-SPOUSAL PLANS

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 transferee RRIF must be considered a "spousal plan" where no contributions by spouse made to transferor RRSPs within time limits set out in 146.3(5.1)(a).

Position:

Legally it's a "spousal plan"; practically it has no effect.

Reasons:

Definition of "spousal plan" in 146(1); time constraints in 146.3(5.1).

							September 10, 1996

	OTTAWA TAX SERVICES OFFICE	HEADQUARTERS
H. C. Beaulac				P. Spice
	Interim Director			(613) 957-8953
	Attention:  Nicole Coté
							962833

Consolidating Spousal and Non-spousal Plans

This is in reply to your round-trip-memorandum of August 21, 1996, enclosing a letter of July 23, 1996, from XXXXXXXXXX and further to a telephone conversation (Spice/XXXXXXXXXX) of August 29, 1996.

XXXXXXXXXX asks whether his and his wife's registered retirement savings plans ("RRSPs") can be consolidated and transferred on maturity into a registered retirement income fund ("RRIF"). Both XXXXXXXXXX have spousal RRSPs (i.e. those to which the spouse has contributed or to which property was transferred from a spousal RRSP) and non-spousal RRSPs (i.e. those RRSPs to which the spouse did not contribute and to which property has not been transferred from a spousal RRSP). XXXXXXXXXX intends to consolidate all the property in the spousal and non-spousal RRSPs of which he is the annuitant and transfer it to a single RRIF of which he is the annuitant. XXXXXXXXXX intends to do the same.

The Income Tax Act (the "Act") does not prohibit the consolidation of properties of one annuitant's spousal and non-spousal RRSPs by transfer to a single RRIF. A transfer from an RRSP to a RRIF is permitted in accordance with paragraph 146(16)(a) of the Act. However, because of the definition of "spousal plan" in subsection 146(1) of the Act, any RRIF which receives property from a "spousal plan" will thereafter be treated as a "spousal plan" for the purposes of the Act. Should XXXXXXXXXX consolidate his RRSPs and transfer them to a single RRIF, the RRIF will be a "spousal plan".

The consequences of the "spousal plan" designation of a RRIF, however, are limited to the attribution of income to the contributor spouse in accordance with subsection 146.3(5.1) of the Act. In the event that neither XXXXXXXXXX have contributed to the other's RRSP in the past 3 years, there will be no attribution of income upon receipt of amounts by the annuitant out of his or her RRIF. Should XXXXXXXXXX contribute to the other's RRSP within the 3 years, there will be attribution of the income to the contributor of any amount received by the annuitant equal to the least of:

(a)all amounts contributed in the year of receipt and in the two preceding calendar years;

(b)the amount received; and

(c)the amount received in excess of the "minimum amount" in respect of the RRIF.

Thus, where no contributions have been made to the transferor RRSP(s) by the other spouse in the 3 calendar years prior to the transfer to the RRIF, the attribution rule in subsection 146.3(5.1) will never apply in respect of the original property transferred. Therefore, it is our view that if it can be determined by the RRIF carrier that the foregoing condition is satisfied, the RRIF carrier need not maintain the "spousal plan" designation in its records. Under the Act, the RRIF will be considered a "spousal plan" but no legal consequences result.

For example, where the spouse has not contributed in any of 1995, 1996 or 1997, and the transfer takes place on December 31, 1997, in our opinion the RRIF carrier need not maintain the "spousal plan" designation in respect of the RRIF. Should the 3 year limit expire at the end of a subsequent calendar year and no further transfers from "spousal plans" have occurred since December 31, 1997, the "spousal plan" designation could be expunged by the carrier at that time. Note that such a RRIF could become a "spousal plan" at a later date if it receives property from an RRSP or another RRIF which is a "spousal plan".

Please note that the RRIF carrier may not be able to determine if contributions have been made by a spouse within the last 3 calendar years because such information may not be communicated to it by the transferor RRSP(s). The carrier may only be advised that the RRSP is a "spousal plan". In this case, the RRIF carrier must maintain the designation and any T4RIFs issued by it must indicate that the RRIF is a "spousal plan" in accordance with the instructions in the T4RSP and T4RIF Guide (at page 10 re Boxes 26, 32 and 43 of the 1995 version).

If XXXXXXXXXX requests a copy of this memorandum, we have no objection to you providing it to him.

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

c.c.Sue Wormington

Specialty Section
Tax Publications Division
Client Assistance Directorate