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:
RRSP transferring funds from mutual fund A to mutual fund B and a redemption fee charged by A is reimbursed by the agent selling units of B.
Position TAKEN:
Reimbursement is simply earnings of the RRSP and is not an advantage, a benefit or a contribution; it is deductible broker.
Reasons FOR POSITION TAKEN:
RRSP is investor and nothing is paid out of RRSP; broker pays amount to earn income.
5-950732
XXXXXXXXXX D. Duff
Attention: XXXXXXXXXX
June 8, 1995
Dear Sirs:
Re: Reimbursement of Mutual Fund Redemption Fees
This is in reply to your facsimile transmission received on March 16, 1995, requesting our opinion on the treatment of the reimbursement of redemption fees charged by mutual funds.
You referred to a situation where a trust governed by a registered retirement savings plan ("RRSP") hold units in a mutual fund. You stated that mutual funds will charge a redemption fee to the RRSP if units are redeemed within a certain time frame. A broker selling units of another mutual fund will reimburse the RRSP for the redemption fee by having the second mutual fund reduce the sales commission and direct it to the RRSP.
In our opinion, provided the reimbursement is paid into the RRSP trust and not to the annuitant, the payment would not be considered to be an advantage pursuant to paragraph 146(2)(c.4) of the Income Tax Act ("Act"), and it would not constitute income to the annuitant. Also, it is not a contribution to the RRSP by or on behalf of the annuitant. Redemption fees are considered expenses of the RRSP trust and, consequently, a reduction of these fees will result in increased earnings of the trust.
You indicated by telephone on June 5, 1995 (XXXXXXXXXX/Duff) that your agents were not employees but were considered to be running a business. Generally, where the agent included the full amount of the commission in income, it would be our opinion that such fees would be deductible against such business income.
You also indicated by telephone that you did not need a response to the situation where the investor is not an RRSP.
We trust our comments will be of assistance.
Your truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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