Principal Issues: How should the amount of a transfer from RRSP to RPP be determined for purposes of the calculation of qualifying transfer and PSPA where non-cash property is transferred?
Position: Fair market value of the property.
Reasons: The definition of "amount" subsection 248(1) of the Act.
XXXXXXXXXX 2004-010428 P. Kohnen, CMA December 16, 2004
Dear XXXXXXXXXX:
Re: Technical Interpretation - Valuation of Property Transferred to RPP
This is in response to your submission of August 11, 2004, to Terry Krowchuk of the Registered Plans Directorate, which was forwarded to this Directorate for our reply. Your submission requests our comments on the value to be used in respect of property that is transferred from a registered retirement savings plan ("RRSP") to a registered pension plan ("RPP") as a qualifying transfer.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.
Our comments
Section 8303 of the Income Tax Regulations (the "Regulations") provides the rules that apply when determining the past service pension adjustment ("PSPA") of an individual for a year in respect of an employer. Subsection 8303(3) provides the general rules for determining an individual's provisional PSPA in respect of a past service event. In general terms, the provisional PSPA is a measure of the increase in pension credits for prior years that arises as a result of the past service event, reduced by certain qualifying transfers made in connection with the event, and increased by certain excess money purchase transfers in relation to the event.
In the formula in subsection 8303(3) of the Regulations, factor C, which reduces the amount, if any, of a provisional PSPA, is the portion of the amount of the individual's qualifying transfers that are not deducted in computing a provisional PSPA of the individual with respect to any other employer.
Pursuant to subparagraph 8303(6)(a)(i) of the Regulations, the amount of an individual's qualifying transfer, for purposes of the provisional PSPA calculation, includes, inter alia, an amount transferred to an RPP from an RRSP in accordance with subsection 146(16) of the Income Tax Act (the "Act") to fund benefits provided to the individual.
The term "amount" is defined in subsection 248(1) of the Act as "money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing", other than certain listed exceptions in the definition, none of which would apply to the scenario being considered herein. In our view, it is the fair market value of the property that is transferred to the RPP that must be used in the calculation of the qualifying transfer and PSPA in respect of the transfer.
We trust that the above comments will be of assistance to you. Please do not hesitate to contact Mr. Phil Kohnen at (613) 957-2093 should you require further information.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
c.c.: Terry Krowchuk
Registered Plans Directorate