2015-0564351E5 Transfer of RRSP for payment of child support

Principal Issues: Can an annuitant transfer an amount from their RRSP to their former spouse’s RRSP on a tax-deferred basis under paragraph 146(16)(b) of the Income Tax Act where the amount transferred is pursuant to a decree, order or judgment of a competent tribunal or under a written separation agreement to settle a child support claim?

Position: No. In order for paragraph 146(16)(b) to apply, the transfer of an amount from the annuitant’s RRSP must relate to a division of property in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

Reasons: Payments related to child support and spousal support are separate and distinct from payments related to division of property.

Author: Doiron, Wayne
Section: 146(16)(b)

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                                                                                        2015-056435
                                                                                        W. Doiron

August 18, 2015

Dear XXXXXXXXXX:

Re:    RRSP transfer under paragraph 146(16)(b)

We are responding to your correspondence in which you inquire whether an individual can transfer an amount from their RRSP to their former spouse’s RRSP on a tax-deferred basis under paragraph 146(16)(b) of the Income Tax Act (“Act”) where the amount transferred is pursuant to a decree, order or judgment of a competent tribunal or under a written separation agreement to settle a child support claim.

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings.

General comments

Paragraph 146(16)(b) of the Act permits a direct transfer of an amount from an individual's RRSP (the "payor's" RRSP) to an RRSP of which his or her spouse or common-law partner or former spouse or common-law partner (the "recipient") is the annuitant, where the payor and the recipient are living separate and apart, the payment or transfer is made under a decree, order or judgement of a competent tribunal, or under a written separation agreement, and the transfer or payment relates to the division of property between the payor and the recipient in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

In our view, the payment of an amount to settle a child support claim under the terms of a decree, order or judgement of a competent tribunal, or a written separation agreement would not comply with the provisions of paragraph 146(16)(b) of the Act because such a payment would not relate to the division of property between the payor and the recipient in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

We trust 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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