29 June 1995 External T.I. 9516805 - SURRENDER OF INSURED RRSP

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:

Amount in insured RRSP which can be transferred to another RRSP on a tax-deferred basis.

Position TAKEN:

Cash surrender value plus accumulated dividends.

Reasons FOR POSITION TAKEN:

Routine

XXXXXXXXXX 951680

June 29, 1995

Dear Sir:

Re: Insured Registered Retirement Savings Plan (RRSP)

This is in reply to your letter of June 16, 1995, in which you ask for a ruling with respect to the amount in your RRSP which can be transferred to another RRSP on a tax-deferred basis.

An advance income tax ruling which is binding on the Department is issued in the manner described in Information Circular 70-6R2 (a copy of this Circular is available from your local tax services office). Where the application for such a ruling is not made in accordance with the guidelines set out in the Circular, the Department can only provide general comments. We trust the following will assist you in understanding the Income Tax Act provisions respecting such matters but point out that these opinions do not bind the Department.

Where the plan is an insurance contract which is comprised of both an RRSP and non-RRSP component, and the annuitant wishes to surrender the insurance contract, the fair market value of the RRSP property which can be transferred directly to another of your RRSP's is the cash surrender value plus any accumulated dividends.

The fact that the total of all premiums identified by the issuer as RRSP contributions total less than the amount arrived at under the calculation in the previous paragraph does not affect the result. When the savings portion of an insurance policy is registered as a retirement savings plan, all premiums paid and identified by the insurance company or agent as premiums for the RRSP portion and the earnings thereon become part of the RRSP. This is so even where the annuitant is unable to claim the tax deduction for the premiums. When the insurance policy is surrendered or otherwise deregistered, the amount taxable as an RRSP benefit or the amount eligible for a tax-deferred transfer to another RRSP or to a registered retirement income fund is the amount identified in the previous paragraph. A benefit in excess of the tax-deducted premiums accrues to the annuitant inasmuch as the earnings on these premiums remained in the RRSP on a tax-sheltered basis.

We trust the foregoing satisfactorily explains the applicable income tax provisions.

Yours truly,

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