19 November 1997 External T.I. 9725545 - RETIRING ALLOWANCE TRANSFER TO RRSP

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:

Reporting of retiring allowances due in one year but paid in the next year, and deductions on the transfer of these to rrsps.

Position:

	Report in the year actually received.  Deduction 	under 60(j.1) available in the same year if 	contribution made within a specified time frame. 	Amounts may otherwise be treated as normal rrsp 	contributions.

Reasons:

Reply based on wording of the relevant provisions.

972554
XXXXXXXXXX W.C. Harding

November 19, 1997

Dear Sir:

Re RRSP Contributions

This is in reply to your letter of September 1997, in which you enquired about the reporting of payments received in lieu of sick leave benefits and the deduction of such amounts when they are transferred to an RRSP.

A retiring allowance received by an individual must be reported in the year it is received. Accordingly, you must report amounts that were due in one year but paid after the end of that year because of processing delays, in the year the amounts are actually received.

When you may claim a deduction for amounts contributed to an RRSP is a more difficult question to answer because there are several ways such transfers can be made. However, if you receive a payment in lieu of sick leave benefits it will generally be treated as a retiring allowance if it was paid at the time of your retirement. You may then be able to transfer the amount to your RRSP and claim a deduction using special rules for the transfer of retiring allowances. In this case, your employer must determine how much of the amount is eligible for transfer to your RRSP and report this amount on the same T4 issued to you for the year in which the payment was made. The actual transfer of the amount must then be made within the same year or within 60 days after the end of the year. If the payment is made within this time period you can then claim the deduction in the same year the amount is reported as income. If the payment is not transferred within this time period, the special deduction can not be claimed. However, you may still be able to claim all or a portion of the amount as a normal RRSP contribution for the year in which the contribution is actually made. You may also be able to claim a deduction for any amount of a retiring allowance that is contributed to an RRSP but is in excess of the amount eligible for transfer under the special rules discussed above as an ordinary RRSP contribution.

You can make contributions of retiring allowances to your RRSP yourself or you can request your employer to pay the retiring allowance directly to your RRSP on your behalf. When the employer makes the contribution the employer will not have to withhold any tax before making the payment. Furthermore, both the payment and the contribution to the RRSP will occur at the same time and are reported in the year the payment is made.

In your letter you also asked about the taxation of RRSP refunds after you are 69 years of age.

Most RRSPs must "mature" before the end of the year in which you reach 69 years of age. When an RRSP matures it has to provide a "retirement income" to you. When you acquired your RRSP you likely elected to receive this retirement income in some form of annuity payable in instalments over a number of years.

When you start receiving these instalments they must be reported as income in the year they are received. The financial institution that holds your RRSP will provide you with an information slip each year to advise you how much must be reported. The financial institution does not have to withhold any tax on these payments. However, you should note that tax will be payable on them when you file your tax return.

We hope these comments will be of assistance to you. However, should you have any additional concerns, please feel free to phone Wayne Harding at (613) 957-8953 and he will be happy to discuss them with you.

Yours truly,

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