Transitional relief is available if an annuitant held one or more prohibited investments on March 23, 2011 in their RRSP or RRIF and continues to hold the investments in their RRSP or RRIF in the tax year. The transitional relief provides that any income earned and capital gains accrued and realized after March 22, 2011 on these investments will not be subject to the 100% advantage tax, but instead will be included in the annuitant’s regular income.

To take advantage of the transitional relief, the annuitant had to file Form RC341, Election on Transitional Prohibited Investment Benefit for RRSPs or RRIFs. This election had to be filed with us on or before March 2, 2013.

The annuitant will be required to withdraw from their RRSP or RRIF within 90 days after the end of the tax year in which the income or gains are earned or realized, an amount equal to their transitional prohibited investment benefit for the year.

An individual’s transitional prohibited investment benefit for a tax year is the total of any income earned and capital gains realized in the tax year on these prohibited investments held on March 23, 2011, less any capital losses realized on these investments in the tax year.

• The amount of a capital gain realized is the positive difference between the fair market value (FMV) of the property when it is disposed of or when it ceases to be a prohibited investment (less reasonable costs of disposition, if any) and the FMV of the property on March 22, 2011. The amount of a capital loss is the negative difference
• Income is considered to be earned when it is recognized as income under general tax rules. For example, trust income is considered to be earned at the end of the tax year of the trust. Dividend income is considered to be earned when received (but for purposes of the advantage rules, the gross-up amount of dividends is to be disregarded)

The amount of the withdrawal will be treated as a regular RRSP or RRIF withdrawal, to be reported by the financial institution on a T4RSP or T4RIF slip, as applicable, for the year of the withdrawal, and included in the annuitant's income on their income tax and benefit return.