17 July 1998 External T.I. 9809575 - TRANSFER TO RRSP OR RRIF - LOSS

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 a capital loss on transfer of property from annuitant to annuitant’s RRSP or RRIF is deductible?

Position TAKEN: No.

Reasons: According to 40(2)(g)(iv) of the Act.

XXXXXXXXXX 5-980957
Fouad Daaboul

July 17, 1998

Dear Sir:

Re: Transfers to a self-directed RRSP or RRIF

This is in reply to your facsimile submission of April 14, 1998, wherein you requested our views on the income tax consequences where an investment is transferred by an individual to the individual's registered retirement savings plans (“RRSP”) or registered retirement income fund ("RRIF").

Generally, whenever properties are contributed to, purchased by, or transferred to, an RRSP, the gift, purchase, or transfer is recorded at fair market value (“FMV”). Such an exchange may represent a purchase and sale of property, or a "premium" paid by the annuitant to his RRSP and a "benefit" received from his RRSP.

Any contribution of property to a RRIF by the annuitant is prohibited by paragraph 146.3(2)(f) of the Act. If such a contribution is made there will be an income inclusion to the annuitant equal to the fair market value of the RRIF property pursuant to subsection 146.3(11) of the Act. However, the acquisition by, or transfer to, a RRIF is recorded at FMV.

Subject to the exception described below, where an annuitant transfers property to her or his RRSP or RRIF, the annuitant will have a disposition of the property so transferred at that time for FMV and a gain or loss may occur. If the annuitant incurs a capital loss on the disposition subparagraph 40(2)(g)(iv) of the Act will deem this loss to be nil and no amount of the denied loss is added to the "cost amount" of the property transferred to the RRIF or RRSP.

Although the foregoing comments are not binding on the Department, we trust they are of some assistance.

Yours truly,

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