18 January 2000 External T.I. 9930895 - TRANSFER TO RRSP

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: Can a retroactive transfer of assets be made to an RRSP?

Position: No.

Reasons: No provision in the law to allow it.

XXXXXXXXXX 1999-000913
G. Kauppinen
January 18, 2000

Dear XXXXXXXXXX:

Re: Transfer to Registered Retirement Savings Plan ("RRSP")

This is in reply to your letter dated November 15, 1999 and further to our telephone conversation on December 6, 1999 (XXXXXXXXXX/Kauppinen).

Briefly, it is our understanding that in early 1999 you held shares of a Canadian corporation (the "Company"). Pursuant to a series of share exchanges involving certain corporations, all the issued and outstanding shares of the Company were exchanged for shares of a U.S. corporation (the "U.S. Co.") effective February 23, 1999. Shareholders were advised to transfer their shares of the Company to their RRSPs prior to February 23, 1999 if they wished to tax shelter an anticipated rapid appreciation in the value of their shareholdings after the share exchange was completed. Any transfer of shares of the Company required the approval of the Board of Directors of the Company (the "Board").

You have indicated that the Board refused to grant you permission to transfer your shares of the Company to your RRSP prior to the completion of the share exchange. You have further indicated that you have initiated a lawsuit against the Company, U.S. Co. and other parties involved in order to, among other things, obtain damages for the economic loss you have incurred as a result of your not having been able to transfer your shares of the Company to your RRSP prior to the share exchange.

This letter is to confirm that the Income Tax Act does not provide for a retroactive acquisition of assets by an RRSP in the circumstances you have described. Any transfer of the shares now owned by you ( shares of U.S. Co.) to your RRSP would be at their fair market value as of the date of transfer. Consequently, any capital gain arising as a result of the transfer to your RRSP would be subject to income tax in your hands personally for the calendar year in which the transfer was made.

While we do not presume to speculate on the quantum, if any, of the economic loss you may have suffered as a result of the foregoing, we can confirm that a capital gain realized on the disposition of shares held inside an RRSP is not subject to income tax pursuant to subsection 146(4) of the Income Tax Act.

We trust our comments are of assistance.

Yours truly,

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