Deferred profit sharing plan (DPSP) lump-sum payments

If you receive any of the types of payments listed below (for example, in cash or by cheque), you have to include them in your income for the year you receive them and you cannot transfer them on a tax-deferred basis. Instead, if you want to transfer these amounts to another registered plan or fund and defer the tax, make sure you inform the payer to transfer them directly.

If you transfer the amount to your RRSP, you must be 71 or younger at the end of the year in which you transfer the funds.

The following amounts can be transferred directly to another DPSP, an RPP, an RRSP, an SPP, a PRPP, a RRIF, or to buy an ALDA:

• a DPSP lump-sum payment you are entitled to receive from your DPSP
• a DPSP lump-sum payment you receive from your current or former spouse's DPSP or common-law partner's DPSP because your current or former spouse or common-law partner has died
• a DPSP lump-sum payment that you receive under a decree, order, or judgment of a competent tribunal, or under a written agreement relating to a division of property between you and your current or former spouse or common-law partner in settlement of rights arising from the breakdown of your relationship

You and the RRSP issuer should fill out and submit Form T2151, Direct Transfer of a Single Amount Under Subsection 147(19) or Section 147.3. For ALDA transfer use the Form T2157, Direct Transfer from a Registered Plan to Purchase an ALDA. The institution that transfers your payment may use other documentation to record the transfer. The institution has to provide you with confirmation of the details of the transfer.

Filling out your income tax and benefit return

If you transferred the amount directly, do not claim a deduction for the amount you transfer and do not include the amount on your income tax and benefit return.

However, if you received the lump-sum payment in cash or by cheque before making the transfer, you cannot defer the tax. Report the amount on line 13000 of your income tax and benefit return in the year the payment is received.

To find out how much you can deduct, refer to Where to find your RRSP deduction limit.