Revenue Canada Taxation
K.B. Harding (613) 957-2129
JUL 18 1988
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Dear XXXX
This is in reply to your letter of October 15, 1987 wherein you questioned whether amounts could be rolled from a U.S. Individual Retirement Arrangement (IRA) to a Canadian Registered Retirement Savings Plan (RRSP).
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In a telephone conversation with Mr. Harding you indicated that the amounts had already been rolled from the IRA to a U.S. bank account in late 1986 or early 1987 since the change in the U.S. tax law would have locked your funds into the IRA until you were 59 1/2 years of age. You are interested whether the funds which originally came from the IRA but were subsequently rolled to the U.S bank account could be rolled to a RRSP.
Since the amounts have been transferred from an IRA to a U.S. bank account, the Canadian Income Tax Act does not provide for a rollover of such funds to a RRSP. However, if such funds had remained in the IRA it is likely that you would have been permitted to roll the funds from the IRA to a RRSP. It is our view that the amounts transferred to a U.S. bank account from the IRA would have been subject to tax in Canada as income from a pension in the year the amounts were transferred from the IRA to the U.S. bank account. In order to avoid double taxation, Canada would provide you with a foreign tax credit with respect to the tax paid to the United States when the amounts were transferred from the IRA to the U.S. bank account.
Any interest earned on the U.S. bank account would be subject to tax in Canada and you will be permitted a foreign tax credit with respect to the U.S. withholding tax paid on the interest included in your income.
We regret the delay in replying to your letter and we are enclosing a copy of a general statement dealing with the treatment of amounts received out of an IRA.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
Enclosures