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 RRSP annuity payments made directly to the bank
account of the annuitant's spouse are considered to be a
transfer of property subject to the provisions of
subsection 160(1).
Position:
Yes.
Reasons:
The annuitant and his or her spouse would be jointly and
severally liable for the annuitant's tax liability to the
extent provided in paragraph 160(1)(e). In addition, the
attribution rules in subsection 74.1(1) would apply to any
income earned on the RRSP annuity payments deposited in
spouse's bank account. Accordingly, paragraph 160(1)(d)
would impose joint and several liability on the annuitant
and the annuitant's spouse for the payment of tax on such
income.
5-964073
XXXXXXXXXX J. Leigh
January 16, 1997
Dear Sir:
Re: Transfer of RRSP Annuity Payments to Spouse
This is in reply to your letter of December 9, 1996 in which you requested our opinion on whether annuity payments under your
Registered Retirement Savings Plan ("RRSP") made directly to your spouse's bank account would be subject to the provisions of subsection 160(1) of the Income Tax Act (the "Act").
Written confirmation of the tax implications of proposed transactions can only be provided by this Directorate where the transactions are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. We can, however, offer the following general comments.
Paragraph 160(1)(e) of the Act provides that when property is transferred by an individual to his or her spouse, the transferor and the transferee would be jointly and severally liable for any amount which the transferor is liable to pay under the Act in or in respect of the taxation year in which the property was transferred or any preceding taxation year. However, the liability of the transferee is limited to the excess of the fair market value of the property at the time of the transfer over the fair market value of any consideration given for the property.
An annuitant under a matured RRSP is required by subsection 146(8) and paragraph 56(1)(h) of the Act to include in computing income the amount of all benefits received in a year out of or under his or her RRSP. If the annuitant directs the issuer of the RRSP
annuity to make the payments directly to his or her spouse's bank account, the annuitant is considered to have transferred property
to his or her spouse. Accordingly, in such circumstances the provisions of paragraph 160(1)(e) of the Act would apply to impose joint liability on the annuitant's spouse in respect of amounts that the annuitant is liable for under the Act up to the amount of the payments paid into the spouse's bank account.
In addition, where the attribution rules in subsections 74.1(1) and 74.2(1) of the Act apply to a transfer of property from an individual to the individual's spouse such that any income realized from such property, and any capital gain from a disposition of the transferred property, is considered to be that of the individual and not of his or her spouse, paragraph 160(1)(d) of the Act provides that both parties are jointly and severally liable for the tax on such income or gain. Accordingly, it is our view that any income earned on the annuity payments deposited in the bank account of the annuitant's spouse or from property substituted therefor will be deemed to be the annuitant's income under subsection 74.1(1) of the Act. As a result, the annuitant and the annuitant's spouse will be jointly and severally liable for the tax on such income pursuant to paragraph 160(1)(d) of the Act.
We note that the fact that the annuitant's spouse is named as the beneficiary under the RRSP is not relevant in determining the tax
treatment of the RRSP annuity payments until such time as the annuitant dies and the spouse becomes the annuitant under the plan.
We are enclosing, for your information, a copy of Interpretation Bulletin IT-511R which provides more detailed information
concerning the attribution rules and the application of subsection 160(1) of the Act.
We trust that these comments will be of assistance.
Yours truly,
Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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