10 March 1995 External T.I. 9433075 - RRSP DAMAGES

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 of settlement to an RRSP due to loss of value upon rollover from pension plan to an RRSP

Position TAKEN:

Settlement not income and 204.2(1) not applied

Reasons FOR POSITION TAKEN:

Long standing position

		5-943307
XXXXXXXXXX	G. Martineau

March 10, 1995

Dear Sir:

Re: RRSP Damages

This is in reply to your letter of October 14, 1994 forwarded by the Surrey Taxation Centre for reply. You request our opinion on the tax treatment of a settlement amount for the loss incurred by your client on the rollover of his pension funds to an RRSP pursuant to section 147.3 of the Income Tax Act (the "Act").

It appears that your enquiry relates to specific proposed transactions. Where a transaction is proposed, confirmation of the tax implications arising therefrom should be sought by way of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. We offer, however, the following general comments.

Where an amount is paid directly by the defendant to an RRSP solely as a result of the return of the monies derived from a settlement of damages in respect of the actions to recover loss for breach of contract related to the above described situation, it is our view that the payment would not be included in the planholder's income for the taxation year. Normally, it is not our practice to apply the provisions of subsection 204.2(1) of the Act to over-contributions where there is a direct payment by the defendant to an RRSP in such a situation.

The above comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust, however, that they are of assistance.

Yours truly,
for Director
Financial Industries Division
Rulings Directorate