2014-0528551E5 Transfer of refund of premium

Principal Issues: Can a deceased RRSP annuitant's financially dependent child or grandchild, who was not dependent on the deceased by reason of physical or mental infirmity, claim a deduction under paragraph 60(l) of the ITA for the amount of a refund of premium that is transferred to a PRPP or an SPP?

Position: No.

Reasons: Clause 60(l)(v)(B.1) limits the amount that may be deducted by a deceased RRSP annuitant's financially dependent non-infirm child or grandchild to the amount of a refund of premiums under an RRSP that was transferred to a qualifying annuity for a fixed term not exceeding 18 years minus the child's or grandchild's age.

Author: Ward, Jason
Section: 60(l)

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                                                                                                                                               2014-052855
                                                                                                                                               Jason R. Ward

June 23, 2014

Dear XXXXXXXXXX:

Re:  Transfer of refund of premiums under an RRSP

Thank you for your correspondence of April 22, 2014, concerning Information Sheet RC4177, Death of an RRSP Annuitant and the tax-free transfer of certain amounts received as a consequence of the death of a registered retirement savings plan (“RRSP”) annuitant. 

In your correspondence, you inquire whether a deceased RRSP annuitant’s financially dependent child or grandchild who was not dependent on the deceased by reason of physical or mental infirmity may claim a deduction under paragraph 60(l) of the Income Tax Act (the “Act”) in a taxation year for the amount of a refund of premiums under an RRSP that is included in the child’s or grandchild’s income in the year and transferred in the year (or within 60 days after the end of the year) to an account under a pooled registered pension plan (“PRPP”) or a specified pension plan (“SPP”). 

Our Comments

Clause 60(1)(v)(B.1) of the Act limits the amount that may be deducted by a deceased RRSP annuitant’s financially dependent child or grandchild who was not dependent on the deceased by reason of physical or mental infirmity to the amount of a refund of premiums under an RRSP that was transferred to an annuity for a fixed term not exceeding 18 years minus the child’s or grandchild’s age in whole years at the time the annuity is acquired.  Consequently, a deduction is not available under paragraph 60(l) of the Act when a non-infirm financially dependent child or grandchild transfers a refund of premiums to an account under a PRPP or an SPP.

Information Sheet RC4177 will be revised to take into account the limit imposed by clause 60(l)(v)(B.1) of the Act.

We trust that our comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CPA, CA
Manager
Deferred Income Plans Section I
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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