17 March 1999 External T.I. 9901005 - RESP, DEDUCTIBILITY OF 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: Are fees related to RESPs deductible?

Position: No

Reasons: 20(1)(bb) does not provide for the deduction unless certain conditions are satisfied and RESPs do not meet any of the conditions.

XXXXXXXXXX 990100
M. P. Sarazin
Attention: XXXXXXXXXX

March 17, 1999

Dear Sirs:

Re: Deductibility of Registered Education Savings Plan (“RESP”) Fees

This is in reply to your facsimile dated January 14, 1999, wherein you requested our views with respect to whether a subscriber or a beneficiary under an RESP can deduct any of the fees related to the maintenance of a RESP (including broker commissions and mutual fund service charges).

There is no provision in the Income Tax Act (the “Act”) that provides a specific deduction for fees paid in respect of a RESP. The Department has issued Interpretation Bulletin IT-238R2 which deals with the deductibility of fees paid to investment counsel. Paragraph 7 of IT-238R2 states that investment counsel fees charged by a trustee of a registered retirement savings plan directly to the annuitant are not deductible by the annuitant, pursuant to paragraph 20(1)(bb) of the Act, because the shares or securities of the plan belong to the trust and not the annuitant. We are of the view that such fees paid in respect of a RESP would not be deductible by the subscriber or the beneficiary of the RESP for the same reasons.

Fees related to property held within a RESP, such as broker commissions and mutual fund service charges, are considered expenses of the RESP. Accordingly, when these fees are paid by the RESP, depending on the terms of the particular plan, the property available for the payment of any subsequent refund of payments, educational assistance payments or accumulated income payment entitlements under the RESP may be reduced. The expressions “refund of payments”, “educational assistance payment” and “accumulated income payment” have the meaning assigned by subsection 146.1(1) of the Act.

We trust that the above comments will be of assistance to you.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate