3 October 1996 External T.I. 9632805 - RRIF ADMINISTRATION & INVESTMENT MANAGEMENT FEES

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:

1)RRIF admin fees;
2)RRIF investment management fees

Position:

1)Confirming position that administration fees paid inside RRIF trust do not constitute benefit or amount received to annuitant;

2)Confirming position that investment management fees paid by annuitant is forbidden by 146.3(2)(f) and would cause income inclusion under 146.3(11); and that payment of fees by plan does not constitute income or any part of "minimum amount" to annuitant.

Reasons:

Routine except new that payment of investment fees by plan does not constitute income or any part of "minimum amount" to annuitant.

									963280
XXXXXXXXXX							P. Spice

October 3, 1996

Dear Sir:

Re: Administration Fees, Investment Management Fees: Registered Retirement Income Fund ("RRIF")

This is further to our telephone conversation of October 1, 1996 (Spice/XXXXXXXXXX), in which you ask us to clarify our position on the payment of the above-noted fees with respect to a RRIF. A description of the fees and the tax consequences flowing from the method of payment follow. Our interpretation concerning the payment of administration fees relates to the proposed amendments to the Income Tax Act (the "Act") as announced in the Budget Speech on March 6, 1996 and is restricted to such payments made after March 5, 1996.

A.ADMINISTRATION FEES

1.Description: Administration fees relate to the overall direction and management of the affairs of the RRIF trust and relate to the normal services provided by a RRIF carrier. They are also sometimes referred to as trustee fees.

2.Method of Payment:

By annuitant - where the RRIF annuitant pays the administration fees after March 5, 1996, no deduction will be allowed. The payment will not be considered the payment of an amount to a RRIF.

By RRIF trust - where funds inside the RRIF are used to pay the administration fees, it is our view that no benefit or amount is received by the annuitant as a consequence.

B.INVESTMENT MANAGEMENT FEES

1.Description: These are expenses relating to the administration or management of the property in a RRIF trust. For more information please refer to the description in paragraph 4 of the enclosed Interpretation Bulletin IT-238R2 (e.g., fees relating to the manager's services of providing custody of securities, maintenance of accounting records, collection and remittance of income, and buying and selling on behalf of the owner).

2.Method of Payment:

By RRIF trust - these fees are properly expenses of the trust and when paid with trust funds there are no tax consequences to the annuitant. Furthermore, such a payment does not constitute any part of the "minimum amount" which is required to be paid to the annuitant in the year.

By the annuitant - payment of RRIF trust expenses by the annuitant is prohibited by paragraph 146.3(2)(f) of the Act. If such a payment is made, in the year the payment is made there will be an income inclusion to the annuitant equal to the fair market value of the RRIF property pursuant to subsection 146.3(11) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

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