16 July 1998 External T.I. 9810265 - RRSP - DISCLAIMER & REFUND OF PREMIUMS

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: Would RRSP property transferred to the surviving spouse (who was not the beneficiary under the will or the designated beneficiary of the RRSP) by way of disclaimer and laws of intestacy be eligible for rollover treatment (146(8.9) and 60(l) of the Act).

Position: Refuse to rule.

Generally, subject to a valid disclaimer and provisions of family laws, a rollover to the surviving spouse is possible.

Reasons: Completed transaction.

Valid disclaimer is a legal matter.

XXXXXXXXXX 	5-981026
		Fouad Daaboul

Attention: XXXXXXXXXX

July 16, 1998

Dear Sirs:

Re: Advance Income Tax Ruling Request

This is in reply to your letter received on March 20, 1998, wherein you requested an advance income tax ruling on behalf of XXXXXXXXXX. We also acknowledge the information provided by your facsimile submission of June 12, 1998, as well as during our telephone conversations (XXXXXXXXXX/Daaboul).

As confirmed in our telephone conversation of June 24, 1998, we are unable to provide the advance ruling as requested. Confirmation of the tax consequences flowing from completed transactions must be obtained from your local tax services office according to Information Circular 70-6R3. Your deposit will be returned to you under separate cover. However, we can provide the following comments which are general in nature and may be relevant to your situation but which are not binding on the Department.

Paragraph 146(8.8)(a) of the Income Tax Act (the "Act") deems the deceased annuitant of a registered retirement savings plan (the "RRSP") to receive a benefit equal to the fair market value of the RRSP property at the time of death. Where the annuitant died after the maturity of the plan, the amount of the benefit is reduced by the amount of RRSP property that became receivable by the surviving spouse as a consequence of the death according to paragraph 146(8.8)(b) of the Act. However, where the annuitant died before the maturity of the plan, subsection 146(8.9) of the Act permits a deduction from the paragraph 146(8.8)(a) income inclusion for a refund of premiums by certain beneficiaries as determined by a formula. Paragraph (a) of the definition of refund of premiums in subsection 146(1) of the Act means any amount paid from an unmatured RRSP to the surviving spouse (other than a tax-paid amount) as a consequence of death. Where an amount is paid out of or under an RRSP to the estate of the annuitant and not directly to a beneficiary, subsection 146(8.1) of the Act permits the surviving spouse and the deceased annuitant’s legal representative to elect to deem certain amounts paid to the estate as a refund of premiums paid to the surviving spouse.

Subsection 248(8) of the Act expands the usual meaning of transfers of property as a consequence of the death of a taxpayer for the purposes of the Act. It provides that a transfer, distribution or acquisition of property will be considered to have occurred as a consequence of the death of a taxpayer where such transfer was made under, or as a consequence of, the terms of a will or other testamentary instrument of the taxpayer or as a consequence of a disclaimer by a beneficiary under a will or other testamentary instrument of a taxpayer.

Subsection 248(9) of the Act describes "disclaimer" for the purposes of subsection 248(8) of the Act. It involves an outright refusal to accept a gift, share or interest under a will, with no stipulation as to how the taxpayer's legal representatives should distribute the disclaimed property. Whether or not a disclaimer is a valid disclaimer for purposes of the Act is a question of fact.

In an intestacy situation (by way of disclaimer or otherwise) where there are beneficiaries other than the surviving spouse, it must be determined what portion of the RRSP is paid to which beneficiary, as a “refund of premiums” is only relevant for certain beneficiaries, particularly the surviving spouse. Paragraph 8 of Interpretation Bulletin IT-500R, Registered Retirement Savings Plans - Death of an Annuitant, discusses this scenario in the context of subsection 146(8.91), i.e. death of an annuitant after the maturity of the annuitant’s RRSP. It is our view, as stated in paragraph 11 of the bulletin, that the comments in paragraph 8 are also generally applicable to unmatured RRSPs for the purposes of subsection 146(8.1).

We trust our comments will be of assistance to you.

Yours truly,

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