Respecting a proposed swap of a savings bond held in an RRSP and a savings bond held in a non-registered account, before concluding that it was “subject to the concept of advantage either as a swap transaction or as an RRSP strip,” CRA stated, respecting the advantage definition:
Consequently, under the definition of advantage, any increase in the FMV of property held in an RRSP that is reasonably considered, in the circumstances, to be attributable, directly or indirectly, to a swap transaction is considered an advantage that is subject to tax. In that regard, the fact that the swap transaction is conducted at FMV is not relevant. The expression, directly or indirectly, used in the definition of advantage, includes (as applicable) any immediate increase in the FMV of the RRSP resulting from the swap transaction, as well as any increase in the FMV of the RRSP that it is possible to attribute to the initial swap transaction. For example, tax in respect of an advantage includes inter alia;
- any dividend, interest or other amount attributable to the swapped property,
- any increase in value of the swapped property or property that replaces the swapped property (regardless of whether or not the increase was realized),
- any income earned on income.
The tax respecting an advantage must be paid on an annual basis. It is therefore necessary to annually calculate the increase in the FMV of the RRSP resulting from an advantage.