Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Can property be transferred between RRSPs at their cost amount?
Position: Yes
Reasons: The Act provides for transfers of property at cost amount in the definition of "disposition".
Signed on November 6, 2001
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your letter of July 5, 2001, on behalf of your constituent, XXXXXXXXXX, concerning the determination of tax on excess foreign property held in his registered retirement savings plan (RRSP).
In 1999, XXXXXXXXXX transferred property held in an RRSP administered by a financial institution to a new RRSP administered by a different institution. Based on the comments in paragraph 12 of Interpretation Bulletin IT-412R2, Foreign Property of Registered Plans, XXXXXXXXXX understood that the transfer would be recorded by the new institution at the same cost used in the original RRSP and there would be no excess foreign property tax implications. However, the new institution recorded the transfer at its value on the date of the transfer resulting in his new RRSP becoming subject to taxation on part of its foreign property.
Paragraph 12 also explains that when an annuitant transfers all of the property held in an unmatured, self-administered RRSP from one trustee to another, and there is no change in the annuitant, then the transaction will not be treated as a disposition or acquisition of property. In this way, the transfer can be recorded at the property's cost amount to the old RRSP. This position was valid for many years. However, on December 23, 1998, new legislation was introduced by Parliament, which modified its application. Under the new legislation, transfers of property between RRSPs made after 1999 will normally be transferred at the property's cost amount. However, transfers of property made between December 23, 1998, and January 1, 2000, may only be recorded at the property's cost amount if an election to do so is made by the trustee of the RRSP that received the property.
An election under this legislation must be made on or before the date a tax return must be filed by the trustee of the RRSP, for the year the transfer occurs. XXXXXXXXXX transferred the property held in his RRSP in 1999 so the election would normally be required early in 2000. However, the Canada Customs and Revenue Agency (CCRA) may accept elections filed later, if it is appropriate to do so. Accordingly, it may still be possible to allow the transfer at the property's cost amount if the financial institution agrees to file the election.
I understand that Mr. Wayne Harding, an official of the Income Tax Rulings Directorate, has been in contact with XXXXXXXXXX of your constituency office and, with her agreement, has discussed the situation and its resolution with XXXXXXXXXX. I also understand that, as a result of these discussions, XXXXXXXXXX has agreed to provide his financial institution with information concerning the original cost of his investments and that Mr. Harding has agreed to provide any assistance required to resolve the issue. If the financial institution agrees to file an election, officials of the CCRA will be able to consider it in light of the circumstances.
Should you or XXXXXXXXXX have any further questions regarding this matter or require further assistance, I invite you to contact Mr. Harding by writing to 15th Floor, 25 Nicholas Street, Ottawa, Ontario K1A 0L5, or by calling 0-613-957-9769 collect. He is aware of our correspondence and will be pleased to assist you.
Please note that the information outlined above is of a confidential nature and is being provided to you in accordance with the Income Tax Act.
I trust my comments will be helpful in replying to your constituent.
Yours sincerely,
Martin Cauchon
C.C. Minister's Office
Political Assistant
W Harding
957-9769
October 15, 2001