5 June 2003 External T.I. 2003-0010855 - RRSP ASSET SOLD AT DISCOUNT

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:

What are the consequences if a mortgage held by an RRSP is sold for less than FMV?

Position:

The difference between the consideration received and FMV is considered a benefit to the RRSP annuitant. T4RSP should be issued.

Reasons: Wording of 146(9).

2003-001085
XXXXXXXXXX Renée Shields
(613) 948-5273
June 5, 2003

Dear XXXXXXXXXX:

Re: Sale of Registered Retirement Savings Plan ("RRSP") Asset at a discount

This is in response to your letter of March 25, 2003 inquiring about the consequences of selling an RRSP asset for less than its fair market value ("FMV").

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

If a mortgage, or any RRSP asset, is disposed of for less than its FMV, subsection 146(9) of the Income Tax Act will require that an amount equal to the difference between the consideration received and the FMV be included in the RRSP annuitant's income for the year. Subsection 214(2) of the Income Tax Regulations will require the trustee of the RRSP to report this amount on an information return. You may refer to the CCRA's T4RSP and T4RIF Guide for assistance in this regard. In particular, we draw your attention to the discussion pertaining to Box 28 of the T4RSP.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate