| June 6, 1990 | |
| Returns Processing Division | Financial Industries Division |
| J.M. Legault, Director | D.S. Delorey |
| 957-3495 | |
| Attention: D.I. Wyse | |
| T3 Assessing | |
| File No. 5-900585 |
SUBJECT: Registered Retirement Savings Plan ("RRSP") Transfer to New Trustee
Attached is a copy of a letter from 24(1) signed by 19(1).
The "solution" requested by 19(1) to allay his concerns about the potential subsection 207(2) assessments would seem to require a favourable administrative position. We thus ask that you reply to his query. For your information, our comments on 19(1) concerns are as follows:
The back-up for the position in paragraph 7 of IT-412 is a letter dated October 30, 1987 sent by R.M. Beith to the 24(1) in which the following comment was made:
"In the context of RRSPs, however, it is our view that a change in trustees alone does not result in the creation of a trust so that there is no transaction with respect to the trust property in such a situation."
The position was adopted following a complaint to the Minister by a taxpayer who claimed he was being unfairly taxed as a result of transferring his RRSP from one trustee to another.
21(1)(b)
The above quote contains the comment "there is no transaction with respect to the trust property in such a situation". It is our view that this comment could be used as a basis for saying that there is also no "distribution" of the trust's property for the purpose of subsection 159(2) of the Act. This would solve the problem of the potential subsection 159(3) liability.
19(1) comments on subsection 207(2) of the Act concern a situation where one trustee transfers RRSP property, including foreign property, to a second trustee and the second trustee then transfers the RRSP property to a third trustee. If the cost of the foreign property were incorrectly understated, or the cost of the non-foreign property were incorrectly overstated, at that time it is transferred to the second trustee and the second trustee does not become aware of the error before the property is transferred to the third trustee, the second trustee is potentially liable under subsection 207(2) of the Act for taxes subsequently assess under subsection 206(2) of the Act against RRSP trust 21(1)(b).
We have informed 19(1) by phone of the file's transfer to you.
for DirectorFinancial Industries DivisionRulings Directorate
c.c. S. Kotlar, Director Registered Plans and Deferred Income Plans Division