Mr. A, a status Indian, who obtained rights in a registered pension plan through employment earnings that were exempted under s. 87 of the Indian Act, had such RPP funds transferred to his RRSP (“Trust A”) which, again at his direction, acquired units (valued by CRA as having a nil value), with Mr. A then receiving a loan from the cooperative.
After noting a CRA position that where amounts in an RRSP relate to amounts transferred from an RPP that relate to tax-exempt employment income, "payments ... from the RRSP are usually tax-free", the Directorate stated:
12. The Agency's position applies to routine situations. Mr. A's transactions are not routine. Therefore, we recommend that you do not exempt from Part I tax under paragraph 81(1)(a) of the Act and section 87 of the Indian Act the amount to be added in computing Mr. A's income under subsection 146(9) or (10), as the case may be.
13. Paragraphs 146(9)(a) and (b) have the effect of adding to the income of an annuitant under an RRSP trust the difference between the FMV of the property acquired by the trust and the consideration given for the property acquired ... .. Similarly, subsection 146(10) has the effect of adding to the income of an annuitant under an RRSP trust the FMV of any property of the trust used or permitted to be used by the trust as security when the property began to be so used ... .