24 October 2001 External T.I. 2001-0100545 - TAXATION OF IRA WITHDRAWALS

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: Is an amount received out of an U.S. IRA taxable when the recipient is a Canadian resident

Position: Yes, if the IRA is considered to be a FRA

Reasons: The amount received is taxable pursuant to clause 56(1)(a)(i)(C.1) of the Act. There is no provision in the Act allowing for the deduction of contributions made to the IRA while the person was resident in the U.S.

XXXXXXXXXX 						2001-010054
M. P. Baldwin, CA
October 24, 2001

Dear XXXXXXXXXX:

Re: U.S. IRA Withdrawals

This is in reply to your letter of September 6, 2001 in which you request information concerning the taxation of a Canadian resident on withdrawals from their Individual Retirement Account ("IRA").

Our Comments

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advanced income tax ruling request. For more information concerning advance income rulings, please refer to Information Circular 70-6R4 dated January 29, 2001. Copies of information circulars are available at your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.

The determination of how an amount received by a Canadian resident out of an IRA in the U.S. would be taxed in Canada requires a review of all of the facts, including the particular terms of the particular IRA. However, we note that a "foreign retirement arrangement" or "FRA" is defined in subsection 248(1) of the Income Tax Act (the "Act") as a plan or arrangement prescribed by section 6803 of the Income Tax Regulations (the "Regulations"). Regulation 6803 then prescribes IRAs established under subsections 408(a), (b) or (h) of the United States Internal Revenue Code of 1986 (the "Code"). Where an IRA is not established under subsections 408(a), (b) or (h) of the Code, we would have to review all of the facts, including the terms of the IRA, to determine whether the IRA would be treated as a personal trust, a pension plan, an employee benefit plan, a retirement compensation arrangement, a salary deferral arrangement or some other form of arrangement for purposes of the Act.

Every person who receives a payment out of or under an IRA that is a FRA must include the amount of the payment in income in accordance with clause 56(1)(a)(i)(C.1) of the Act except to the extent the amount would not be subject to income taxation in the United States if the recipient were a United States resident. There is no provision in the Act that provides for a reduction of the amount to be included in income in respect of the recipient's contributions made to the IRA while that person resided in the United States.

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

Yours truly,

Roberta Albert, CA
For Director
Financial Industries Division
Income Tax Rulings Directorate