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:
A taxpayer disposed of Euro “securabonds” to his RRSP and, in consideration thereof, received property the value of which was less than the fair market value of the securabonds, since the valuation provided for the bonds by the financial advisor was incorrect. The taxpayer subsequently received full FMV consideration. Was there an RRSP contribution or other adverse tax result?
Position:
The parties did not consider the transaction as a withdrawal followed by a contribution to the RRSP. The only issue was one of incorrect valuation. Hence, no over-contribution arose and the annuitant was deemed disposing at fair market value. The operation by which the annuitant later received appropriate consideration for the transfer should not be treated as a withdrawal either.
Reasons:
It is acceptable that an annuitant would make a bona fide transaction (disposition or acquisition of property for consideration) with his RRSP and not treat the transaction as a contribution.
July 3 1998
D. L. McInall HEADQUARTERS
Sudbury TSO P.-A. Sarrazin
(613) 957-8984
980147
Waiver - RRSP Over-Contribution
This is in reply to your Memorandum of January 14, 1998, in which you requested our views and comments on this file, the facts of which are described below.
On XXXXXXXXXX, the taxpayer’s financial advisors recommended that “Securabond” strip bonds be transferred into the taxpayer’s RRSP account and that other consideration be removed from the account as consideration for the strip bonds. When the transfer took place, XXXXXXXXXX was advised that the bonds had a fair market value of $XXXXXXXXXX, when in fact the FMV was $XXXXXXXXXX. The financial advisors were later advised of this error and “took the appropriate steps” to correct the error. The taxpayer’s representative are concerned that the Department may consider that an over-contribution to the taxpayer’s RRSP arose as a result of the transaction, and they seek the application of the waiver provision under subsection 207.1(4).
We have contacted the taxpayer’s representative for more information on the issue. We have obtained confirmation that the initial transfer to the RRSP was not treated by the parties as a contribution or a withdrawal from the RRSP. We are also told by the taxpayer’s representative, but have not been able to confirm, that the taxpayer has amended his 1996 return to establish the proper gain on the sale of the strip bonds to his RRSP and has taken steps to receive adequate consideration from the RRSP for the disposition of the bonds. To that effect, the representative states that a T1 adjustment was filed to amend Schedule 3 and Schedule 4, on a document dated XXXXXXXXXX.
As far as we are concerned, the only issue here is the transfer itself and the consideration provided in return. The facts presented to us do not indicate what “steps” were taken to correct the situation. If these “steps” involved proper consideration being provided to the annuitant for the transfer of the bonds as submitted by the representative, then the transaction was made at fair market value. So long as the purchase and sale were for FMV and the sale was reported correctly on the individual’s personal income tax return, there is no over-contribution, or other tax issue.
We trust that this is satisfactory.
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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