4 July 1995 External T.I. 9511135 - TFR FROM ONE RRSP TO ANOTHER

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Will the conversion of one RRSP trust into another RRSP trust result in the application of subsection 206(4) of the Act?

Position TAKEN:

Question of fact

Reasons FOR POSITION TAKEN:

If the changes to trust are insignificant and no new trust result under trust law then 206(4) will not apply. Conversely, if the changes result in a new trust being created under trust law then subsection 206(4) will apply.

		951113
XXXXXXXXXX		M.P. Sarazin

Attention: XXXXXXXXXX

July 4, 1995

Dear Sirs:

Re: Transfers of Property Between
Registered Retirement Savings Plans ("RRSP")

This is in reply to your letter dated April 12, 1995, in which you ask whether subsection 206(4) of the Income Tax Act (the "Act") applies to the above-noted transfers. For purposes of the following discussion, the RRSPs are limited to those trusts described in paragraph 205(1)(b) of the Act.

In the situation where a Trust Company converts each of its existing RRSP trusts into a separate self-directed RRSP trust (the "Transferee Trust"), you are of the view that, pursuant to subsection 206(4) of the Income Tax Act (the "Act"), the cost amount of the property held by the Transferee Trust immediately after the transfer would be equal to the fair market value of such property immediately before the transfer.

Comments

If the variation of the terms of an existing trust does not result in the creation of a new trust under trust law then the provisions of subsection 206(4) of the Act will not apply to the conversion. However, if the variation of the terms of an existing trust are significant and result in the creation of a new trust under trust law then the provisions of subsection 206(4) of the Act will apply to the particular conversion of one RRSP trust into another RRSP trust. In any case, the determination of whether a variation of the terms of a trust results in the creation of a new trust is a question of fact which can only be determined subsequent to a review of all of the trust documents and all of the facts.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate