19 March 1997 External T.I. 9704935 - TAXATION OF INDIANS

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:

The tax treatment of payments under a RRIF to a status Indian

Position:

The payments will be tax exempt

Reasons:

Based on the Williams decision, the Department's stated position is that, when payments from an RRSP or a RRIF relate to income that was exempt from tax, the payments will usually be exempt from tax.

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Attention: XXXXXXXXXX

March 19, 1997

Dear Sirs:

Re: Indians - Payments from a Life Income Fund ("LIF")

This is in reply to your letter of February 11, 1997, wherein you requested our comments with respect to the tax treatment of amounts that will be received by a status Indian under a LIF. It is our understanding that amounts in a registered pension plan which related to the tax-exempt employment income of a status Indian were transferred to a registered retirement savings plan ("RRSP"). It is now proposed that the funds in the RRSP be used to acquire a LIF.

Written confirmation of the tax implications inherent in a proposed factual transaction can only be given by way of an advance income tax ruling. However, we will provide the following general comments.

It is our understanding that LIFs, which are governed by provincial law, are generally registered as registered retirement income funds ("RRIFs") pursuant to the Income Tax Act (the "Act") but are subject to additional rules contained in the provincial legislation. It is our general position that, when payments from a RRIF relate to income that was exempt from tax, the payment will usually be exempt from tax.

We trust our comments will be of assistance to you.

Yours truly,

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