2003 Ruling 2003-0020573 - RRSP TRANSFER AFTER DIVORCE

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:

Will a transfer from an individual's RRSP to that of his former spouse, pursuant to an amended Separation Agreement, satisfy subsection 146(16)?

Position: Yes

Reasons:

The transfer will be made in accordance with an amendment of a separation agreement varying the terms of the original agreement relating to the division of property between spouses in settlement of rights arising out of, or on the breakdown of their marriage.

XXXXXXXXXX 2003-002057

XXXXXXXXXX, 2003

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Taxpayer")

This is in reply to your letter of XXXXXXXXXX in which you request an advance income tax ruling on behalf of the Taxpayer.

We understand that, to the best of your knowledge and that of the Taxpayer, none of the issues involved in the ruling request is:

(i) in an earlier return of the Taxpayer or a related person,

(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the Taxpayer or a related person,

(iii) under objection by the Taxpayer or a related person,

(iv) before the courts or,

(v) the subject of a ruling previously issued by the Directorate to the Taxpayer or a related person;

Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended to the date of this letter, (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.

Our understanding of the facts, proposed transaction and the purpose of the proposed transaction is as follows:

1. The Taxpayer resides at XXXXXXXXXX.

2. The Taxpayer files his personal income tax return with the XXXXXXXXXX Taxation Centre and is served by the XXXXXXXXXX Tax Services Office.

3. The Taxpayer and XXXXXXXXXX (the "Spouse") were married on XXXXXXXXXX and were separated on XXXXXXXXXX. The Taxpayer and the Spouse (collectively, the "Parties") are now divorced and living separate and apart.

4. Having entered into several partial and/or temporary separation agreements, the Parties executed a final separation agreement dated XXXXXXXXXX (the "Separation Agreement"). The Separation Agreement provided, inter alia, for division of property and for combined child and spousal support payments from the Taxpayer to the Spouse.

5. On XXXXXXXXXX an Award of Arbitrator varied the amount of spousal support. This Award of Arbitrator did not provide for a release of future spousal support claims by the Spouse.

6. Due to circumstances involving her employment, unexpected health problems and lower than anticipated investment proceeds realized by the Parties, the Spouse has requested a variation of the Award of Arbitrator to increase the spousal support award.

Proposed Transaction

7. The Parties have negotiated a settlement whereby the Spouse's support requirements would be met by amending the property division provided for in the Separation Agreement. The settlement calls for the Taxpayer to transfer $XXXXXXXXXX directly from his RRSP to the Spouse's RRSP. This transfer will be in full and final release of all future claims for spousal support by the Spouse. The transfer will be made pursuant to a written Amending Separation Agreement, which will provide, in part, as follows:

The Parties agree to amend the property provisions of their Separation Agreement dated XXXXXXXXXX, so as to provide that upon both Parties signing this Amending Separation Agreement, [the Taxpayer] will rollover from his RRSP to [the Spouse's] RRSP the sum of XXXXXXXXXX from his RRSP at ________________, Plan No. _________ to [the Spouse's] RRSP at __________________, Plan No. ___ _____, pursuant to subsection 146(16) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp) and any amending or successor legislation. [The Taxpayer] will also provide Form T2220 and deliver it immediately to [the Spouse] to effect the rollover. Both Parties will complete and sign Form T2220 "Transfer from an RRSP or a RRIF to Another RRSP or RRIF on breakdown of Marriage or Common-Law Partnership." There shall be no other variation of the property provisions in said Separation Agreement.

Purpose of the Proposed Transaction

8. The purpose of the proposed transfer is to provide for a final division of property between the Taxpayer and the Spouse in settlement of rights arising out of, or on breakdown of their marriage.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transaction and provided that the Separation Agreement is amended as described above, we rule as follows:

A. Subsection 146(16) will apply to the transfer made in accordance with 7, above.

The above advance income tax ruling, which is based on the Act and Regulations in their present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and is binding on the Canada Customs and Revenue Agency provided that the proposed transfer is completed by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch