23 June 1998 External T.I. 9805625 - ROLLOVER US IRA TO 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: Can a foreign retirement arrangement (FRA) that contains amounts transferred from a 401(k) plan (to which employer contributions were made) be an eligible amount to be rolled over to an RRSP under 60(j)(ii) and 60.01?

Position: Yes.

Reasons: Since the individual has acquiesced to such a transfer instead of receiving the funds out of the US retirement or pension plan, he would effectively be contributing the funds to his foreign retirement arrangement (FRA).

XXXXXXXXXX 5-980562
Fouad Daaboul

Attention: XXXXXXXXXX

June 23, 1998

Dear Sirs:

Re: Rollover from U.S. Individual Retirement Account (IRA) to RRSP

This is in reply to your letter of February 27, 1998, wherein you requested a technical interpretation on the eligible amount (under section 60.01 of the Income Tax Act (the "Act")) that may be transferred on a tax deferred basis to a registered pension plan (the "RPP") or registered retirement savings plan (the "RRSP") under paragraph 60(j) of the Act. Specifically, you have asked us to consider several situations where employer contributions have initially been made to various vehicles which were subsequently transferred into an IRA.

A foreign retirement arrangement ("FRA") is defined in subsection 248(1) of the Act as a "prescribed plan or arrangement". Section 6803 of the Income Tax Regulations provides that a plan or arrangement referred to in 408(a), (b), or (h) of the Internal Revenue Code of the United States (the "US") is a FRA. Therefore, an IRA described in section 408(a) of the Internal Revenue Code would be an FRA.

Pursuant to subparagraph 60(j)(ii) of the Act, a taxpayer may transfer certain amounts that are included in the taxpayer's income for the year to an RPP or RRSP. One such amount is the amount determined under section 60.01 of the Act, which provides that an amount received by a taxpayer from an FRA is an "eligible amount" if all of the following conditions are met:

1. the amount must have been included in the taxpayer's income pursuant to clause 56(1)(a)(i)(C.1) of the Act;

2. the amount cannot be part of a series of periodic payments. In other words, it has to be a lump-sum payment; and

3. the amount must have been derived from contributions made to the FRA by either the taxpayer or the taxpayer's spouse or former spouse.

With respect to 3 above, a FRA lump sum payment that was derived from an amount transferred to the FRA from a US retirement or pension plan at the direction of the taxpayer, or the taxpayer's spouse or former spouse satisfies the requirement that the lump sum must have been derived from contributions made to the FRA by such a person. Since the individual has acquiesced to such a transfer instead of receiving the funds out of the US retirement or pension plan, she or he would effectively be contributing the funds to her or his FRA. As such, a lump sum payment from an FRA is an "eligible amount" if it is in respect of an amount from a US retirement or pension plan previously contributed directly or indirectly to the FRA.

The Department considers that a 401(k) plan is a US retirement or pension plan.

It would be a question of fact whether or not other amounts transferred to an FRA would be considered to be from a US retirement or pension plan.

We trust our comments will be of assistance to you.

Yours truly,

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

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