5 October 1995 External T.I. 9517205 - PROPERTY TRANSFERS BETWEEN PLANS

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:

General questions on the transfer of property between various deferred plans?

Position TAKEN:

Routine

Reasons FOR POSITION TAKEN:

		951720
XXXXXXXXXX	M.P. Sarazin

Attention: XXXXXXXXXX

October 5, 1995

Dear Sirs:

This is in reply to your letter dated June 27, 1995, wherein you requested our comments in regards to each of the following general questions.

Can an individual transfer pension funds, retiring allowances and severance pay to a spousal registered retirement savings plan ("RRSP")?

Pension Funds

Provided the amount of the lump-sum registered pension transfer is within defined limits, an individual may transfer a lump-sum payment from a registered pension plan ("RPP") directly to his or her own RRSP under the provisions of subsection 147.3(1) or subsection 147.3(4) of the Income Tax Act (the "Act"). The individual would use a T2151 to instruct the RPP administrator to transfer directly to the individual's RRSP. Such transfers can only be made to an RRSP for the member's spouse pursuant to subsection 147.3(5) which applies to marriage breakdowns.

Retiring Allowance

An individual may transfer the eligible part of a retiring allowance to his or her own RRSP under paragraph 60(j.1) of the Act. The eligible portion may not be transferred to a spousal RRSP. In order to avoid having income tax withheld from the retiring allowance, the individual may choose to have the retiring allowance transferred directly to the RRSP by completing Form TD2 and giving it to the employer prior to the payment of the retiring allowance.

Severance Pay

Generally, the Department's position is that severance pay would constitute a retiring allowance since it represents compensation for loss of employment. Where all or part of the severance pay qualifies as a retirement allowance, that part can be transferred as stated above.

When funds withdrawn from a spousal RRSP under the Home Buyer's Plan are repaid, do the repayments have to be to a spousal RRSP?

Where an individual has withdrawn funds from an RRSP (spousal or personal) under the Home Buyer's Plan, the provisions of subsection 146.01(3) of the Act require the repayment by the individual be made to an RRSP under which the particular individual is the annuitant. Consequently, the repayments do not have to be made to a spousal RRSP.

In the event of a divorce or the death of the contributor, can a spousal RRSP be transferred to a non-spousal RRSP and can a RRIF be transferred to a another RRIF?

Spousal plans are only relevant for the purposes of the attribution rules in subsections 146(8.3) and 146.3(5.1) of the Act, which only apply when spouses are still living together as a married couple. These rules attribute the income from the spousal plans back to the contributor. When, as a result of the death of the annuitant or the breakdown of the annuitant's marriage, amounts are transferred from a spousal plan to a plan of the annuitant's spouse or former spouse, such amounts are being transferred to the contributor's plan. Consequently, the attribution rules are no longer relevant.

Your question regarding registered retirement income fund payments being subjected to a reduced rate of withholding taxes under the Canada-U.S. Income Tax Convention (1980) has been forwarded to our Foreign Section for its consideration. In the meantime, the chief of the section, Mr. Ken Major, may be contacted at (613) 957-8953.

We have enclosed a copy of IT-500 and ATR-37. We would also recommend that you refer to the "RRSP and Other Registered Plans for Retirement" guide which can be picked up at your local Tax Services office.

We trust the above comments will be of assistance to you.

Yours truly,

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

c.cKen Major, Chief
Foreign Section