My Trustee cashed in my RRSP because it was a non-exempt asset. Am I responsible to pay the tax on that RRSP?
No. The bankruptcy estate is responsible to pay any tax on that RRSP. You are not required to add it to your income or pay the tax on it.
When a Trustee redeems an RRSP as part of its administration of a bankrupt estate, the financial institution is required to withhold an amount of tax when it is redeemed. Once the Trustee receives the funds, the Trustee is responsible for the preparation of what is referred to as an “in-bankruptcy” tax return. And tax that is due on that return is paid out of the RRSP proceeds that were received by the Trustee. Any refund would be paid to the Trustee.
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