K.B. Harding (613) 957-2124
JUL 19 1988
Dear Sirs:
This is in reply to your letter of August 28, 1987 wherein you requested our opinion whether your clients, XXXX could roll amounts from their Individual Retirement Accounts (IRA) to a Registered Retirement Savings Plan (RRSP).
We have recently completed our review concerning the treatment of amounts received out of various types of retirement plans in the United States. Enclosed is a copy of our general comments on such plans for your perusal.
With respect to your specific request it would appear that your clients have contributed XXXX each to a Custodial Account IRA. It is our view that your clients are required to include in income in each taxation year all amounts of income earned in the account in that year. When a depositor receives a lump sum amount out of a custodial account, the amounts received out of the account will be exempt from tax in Canada except for the income earned in the account in the year the IRA is redeemed.
If contributions had been made into the IRA as a result of a rollover of lump sum amounts from a U.S. pension plan or 401(k) plan, the amounts received out of the IRA would be subject to tax in Canada as pension benefits in accordance with paragraphs 3 and 4 of the attached.
It would appear from the documentation submitted that XXXX contributions to the plan did not result as a rollover of benefits from a U.S. pension plan or 401(k) plan. Consequently they would not be permitted to roll amounts received out of the IRA to a RRSP.
We trust these comments are adequate for you purposes and we are returning the documentation submitted for our review.
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. D. Beauchamp Taxpayer Assistance Section Room 200 400 Cumberland