Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Tax payable on prohibited investment

• 207.61 (1) A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, at any time in the year,

  • (a) the arrangement acquires property that is a prohibited investment for the arrangement; or

  • (b) subject property of the arrangement becomes a prohibited investment for the arrangement after March 29, 2012.

• Marginal note:Amount of tax payable

  (2) The amount of tax payable in respect of each property described in subsection (1) is 50% of the fair market value of the property at the time referred to in that subsection.

• Marginal note:Refund

  (3) If in a calendar year an RCA trust disposes of a property in respect of which a tax is imposed under subsection (1) on the custodian of the retirement compensation arrangement, the custodian is entitled to a refund for the year of an amount equal to

  • (a) the amount of the tax so imposed, unless paragraph (b) applies; or

  • (b) nil,

    • (i) if it is reasonable to consider that the custodian, or a specified beneficiary of the arrangement, knew, or ought to have known, at the time the property was acquired by the arrangement, that it was, or would become, a property described in subsection (1), or

    • (ii) if the property is not disposed of by the arrangement before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.

• Marginal note:Deemed disposition and reacquisition

  (4) If, at any time, a property held by an RCA trust ceases to be, or becomes, a prohibited investment for the RCA trust, the RCA trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.

Marginal note:Tax payable in respect of advantage

• 207.62 (1) A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, in the year, an advantage in relation to the arrangement is extended to, or is received or receivable by, an RCA trust under the arrangement, a specified beneficiary of the arrangement or any person who does not deal at arm’s length with the specified beneficiary.

• Marginal note:Amount of tax payable

  (2) The amount of tax payable in respect of an advantage described in subsection (1) is

  • (a) in the case of a benefit, the fair market value of the benefit;

  • (b) in the case of a loan or an indebtedness, the amount of the loan or indebtedness; and

  • (c) in the case of an RCA strip, the amount of the RCA strip.