20 March 1998 External T.I. 9803455 - DPSP RRSP TRANSFER MARRIAGE BREAKDOWN

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:

Transfer from a DPSP to an RRSP and a then transfer amount to spouse's RRSP.

Position:

Transfers may occur.

Reasons:

Subsection 147(20) & (19) and 146(16) of the Act permit the transfer. Transactions are not abusive.

980345

XXXXXXXXXX F.S. Gillman, LL.L., C.A.

March 20, 1998

Dear XXXXXXXXXX:

Re: Spousal Transfer

This is in reply to your letter dated February 10, 1998 wherein you requested clarification as to the proper income tax treatment of a transfer (that will occur at some unknown time in the future) by your client’s husband from his deferred profit sharing plan (“DPSP”) to your client’s registered retirement savings plan (“RRSP”) via his RRSP.

The situation described in your letter appears to be an actual fact situation relating to an actual proposed transaction. Situations which relate to an actual proposed transaction, should be the subject of an advance income tax ruling. Should this be the case, your query should take the form of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R3 dated December 30, 1996. As expressed at paragraph 7 in the Information Circular, the Department will not express opinions on definite transactions that are being proposed other than by way of an advance income tax ruling, nor will the Department provide rulings on completed transactions. However, we are prepared to provide you with the following general comments.

Revenue Canada has published Interpretation Bulletin IT-528 which deals specifically with transfers between registered plans. Transfers from DPSP’s are discussed in paragraphs 1 to 4 of IT-528. Therein it states that a member of a DPSP may elect to have a lump-sum amount that is otherwise payable to him transferred to an RRSP of which he is the annuitant in accordance with the provisions of subsection 147(19) of the Act. When this occurs subsection 147(20) of the Act will apply to prevent the inclusion of the amount in the member's income solely because of the transfer. Subsection 147(20) of the Act also provides that no taxpayer may deduct an amount in respect of the transferred DPSP amount. There are no provisions which permit such a transfer to a spouse’s RRSP.

IT-528 further goes on to discuss at paragraphs 5 to 8 transfers from an RRSP. Therein it states that a transfer under subsection 146(16) of the Act from one spouse's unmatured RRSP to the other spouse's or former spouse's RRSP may occur on a roll-over basis provided that the spouses are living separate and apart and the transfer is made under a decree, order or judgement of a competent tribunal, or under a written separation agreement relating to the division of property between the transferor and the transferor’s spouse or former spouse in settlement of rights arising out of, or on the breakdown of, their marriage.

These opinions are our best interpretation of the law as it applies generally. They may, however, not always be appropriate in the circumstances of a particular case. As stated in paragraph 21 of Information Circular 70-6R3 written opinions are not advance rulings and, accordingly, are not binding on the Department.

We trust these comments will be of assistance.

Yours truly,

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