| 24(1) | 5-920128 |
| P. Spice | |
| (613) 957-8953 |
Attention:19(1)
April 13, 1992
Dear Sirs:
This is in reply to your facsimile transmission of March 26, 1992, in which you ask for a technical opinion concerning the comparative tax treatments of a deceased taxpayer who was an annuitant under a "regular" annuity and one who was an annuitant under a registered retirement income fund ("RRIF"). In both cases the annuitant has no spouse and no dependent children.
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 ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The following comments are, therefore, of a general nature only, and are not binding on the Department.
We would first clarify that the only comparative analysis we can provide would involve that between a RRIF and an annuity purchased with funds derived from tax-deductible contributions to a registered retirement savings plan ("RRSP"). The receipt of income from annuities purchased with after-tax dollars will be subject, of course, to different taxation consequences.
On the death of a RRIF annuitant, the fair market value of the RRIF property is brought into the deceased's income for the year of death pursuant to subsection 146.3(6) of the Act.
The types of annuities that can be purchased with RRSP funds are described in clause 60(l)(ii)(A) and paragraph 146(1)(i.1) of the Income Tax Act (the "Act").
Under paragraph 60(l) of the Act an individual may purchase an annuity with funds directly transferred from an RRSP which has matured, where the funds represent a full or partial commutation of the retirement income to have been provided under the RRSP. (A paragraph 60(l) annuity may also be purchased with amounts received out of a RRIF in excess of the "minimum amount" as described in paragraph 146.3(1)(b.1) of the Act.) The annuity which may be purchased can be for the life of the annuitant with or without a guaranteed term, or for a term of years equal to 90 minus the age of the individual at the time of the purchase of the annuity. In the event the annuitant dies and the guaranteed term or term of years has not expired, the deceased will be subject to taxation for the year of death on the value of his interest in the annuity pursuant to subsection 70(2) of the Act.
When an RRSP matures, a "retirement income" must be provided as defined in paragraph 146(1)(i.1) of the Act. Where the individual has no spouse, the kinds of annuities that may be purchased to satisfy the "retirement income" definition are identical to those described in paragraph 60(l) of the Act. The consequences on death are, likewise, identical since the fair market value of the RRSP property is taxable in the deceased's hands for the year of death under subsection 146(8.8) of the Act.
To conclude, the income tax consequences on the death of an unmarried annuitant with no dependent children will be the same whether the instrument governing his rights to the retirement income is a RRIF, an RRSP or a paragraph 60(l) annuity.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate