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: It is proposed that annuitants under an RRSP be permitted to transfer assets from the RRSP to a registered charity. The charity would provide the annuitant with the retirement income and retain any balance of assets on the annuitants death. It is requested that no tax consequences be recognized to the annuitant (or the annuitant's estate) at the time of the transfer or when the annuitant dies.
Position: The proposed position could not be maintained under the current wording of the Act. The desirability of amending the Act or prove the requested treatment would properly be within the responsibility of the Department of Finance.
Reasons: In order to achieve the desired tax result, it would be necessary either to disregard any tax consequences of the initial disposition from the trust or it would be necessary to treat the recipient charity in the same manner as a registered plan. Moreover, we think it should be recognized that commercial annuities are different in nature from charitable annuities such that IT-111R2 might not condone the issuance of commercial annuities from a charity.
January 13, 2000
HEADQUARTERS HEADQUARTERS
Charities Division R. Maley
957-9226
Attention: Carl Juneau
1999-000704
Charitable Gift Annuities Using "Registered" Funds
This is in response to your memorandum dated September 27, 1999, seeking our comments to a letter dated June 10, 1999 from XXXXXXXXXX. The XXXXXXXXXX is seeking the CCRA's approval of a charitable gifting arrangement wherein individuals could arrange to transfer funds from their RRSPs to a charity in exchange for the charity providing them with a retirement annuity. On the annuitant's death, the residue of the RRSP would be retained by the charity. The XXXXXXXXXX is proposing that the funds so transferred by an RRSP not be de-registered from the RRSP, but on the annuitant's death, the funds not form part of the annuitant's estate for the purposes of section 70.
The description in the XXXXXXXXXX submission of the proposed arrangement is not very detailed. It is our view that, in some circumstances, an annuitant may arrange to purchase an annuity with funds held by his or her RRSP in a manner that would benefit a registered charity. However, depending on how the purchase is effected, there may be a resultant inclusion in the annuitant's income. We would refer you in this respect to our opinion E9501085 dated April 28, 1995, a copy of which is attached here.
If the XXXXXXXXXX is suggesting that subsection 146(9) not apply to certain legal dispositions of assets by RRSPs to registered charities that would otherwise be recognized under the Act (for example, for the purposes of any subsequent application of section 70), it is our view that this position could not be maintained under the current wording of the Act. The desirability of amending the Act to provide such an outcome would properly be within the responsibility of the Department of Finance.
Similarly, the Act does not provide any authority for treating a transfer of assets from an RRSP to a registered charity in the same manner (for example, for the purposes of subsection 146(16)) as it would a transfer of assets to another registered plan.
It also seems to us that IT-111R2 does not necessarily condone the issuance of annuities as described in the XXXXXXXXXX submission. Paragraph 2 of IT-111R2 makes clear that a charitable organization, as defined in subsection 149.1(1), may enter into an arrangement to issue annuities without jeopardizing its registered status unless the issuing of annuities becomes a business that is not a related business of the charitable organization. The annuities described in the submission would replace the use of RRIFs or other commercial annuities by the donors of the RRSP funds.
We think that commercial annuities are fundamentally different from the charitable annuities condoned by IT-111R2. It should be recognized that issuing an annuity puts the assets of a charity at risk, and even more so with a commercial annuity.
If you would like to discuss this further, please contact Robin Maley (957-9226) of the Financial Industries Division directly.
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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