Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
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:
1. Can an annuitant sell property that is owned by an RRSP trust?
2. Can property held in an RRSP trust be transferred or sold to the annuitant?
Position:
1. No.
2. Yes.
Reasons:
1. Property held in the RRSP trust is held in the name of the RRSP trustee.
2. There is nothing in the Act preventing the sale or transfer of property from an RRSP trust to the annuitant. However, sales have to be at FMV and transfers result in an income inclusion of the FMV of the property.
XXXXXXXXXX 2002-012117
M. P. Sarazin, CA
March 19, 2002
Dear XXXXXXXXXX:
Re: Annuitant Disposition of RRSP Property
This is in reply to your letter of January 29, 2002, requesting our views regarding the amount to be included in income where an annuitant under a registered retirement savings plan ("RRSP") sells shares held in a self-directed RRSP and the proceeds from the sale are retained by the annuitant.
In your letter you have outlined an actual fact situation related to completed transactions. As noted in Information Circular 70-6R3 (tax publications are available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this Directorate can only provide advance income tax rulings in respect of specific proposed transactions. We must advise you that the review of completed transactions falls within the responsibility of tax services offices. Consequently, we can only provide you with the following general comments.
The Canada Customs and Revenue Agency's general views regarding qualified investments held by a trust governed by an RRSP are found in Interpretation Bulletin IT-320R2 entitled "Registered retirement savings plans - qualified investments". Paragraph 1 of IT-320R2 states very clearly that all investments of an RRSP trust must be registered in the name of the trustee, not in the name of the annuitant or any other person. Consequently, an annuitant is not able to sell shares held by an RRSP trust until the shares are transferred from the RRSP trust to the annuitant or the shares are sold by the RRSP trust to the annuitant.
Property held in an RRSP trust may be transferred to an annuitant at any time. However, the fair market value of the property would be considered a benefit under subsection 146(1) of the Income Tax Act (the "Act") and this amount would have to be included in the annuitant's income at the time of transfer. Withholding tax provisions apply in respect of benefits provided under an RRSP. Property held in an RRSP trust may be sold to the annuitant without any tax ramifications where the property is disposed of for its fair market value. We would have to review all of the facts to determine whether the property has been transferred or sold to the annuitant by the RRSP trust.
The term "fair market value" is not defined in the Act and therefore takes on its ordinary meaning in its application under the Act. Black's Law Dictionary (6th edition) defines fair market value as "the amount at which property would exchange hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts". Other definitions can be found but all generally apply the same tests and conditions. Consequently, the determination of the fair market value of any property is a question of fact.
The fair market value of a public corporation's shares is generally the trading price on the date of the transfer. Where there are no trades for a significant period before and after a relevant date, the fair market value can only be determined after a review of all of the relevant trading information available at that time. The determination of whether the fair market value of a specific share is reasonable in any particular circumstances is the responsibility of the Valuations Unit of the relevant tax services office. Consequently, you may want to discuss this issue with the Edmonton Tax Services Office.
We trust these comments will be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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