1 June 2000 External T.I. 2000-0018235 - LLP,FEES RELATED TO WITHDRAWALS

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: Is the amount of the withdrawal under the Lifelong learning Plan before or after any costs incurred by the RRSP in cashing-in investments in order to make the payment under LLP?

Position: After.

Reasons: The eligible amount received by the annuitant is restricted to a maximum and the fees paid by the RRSP in respect of its investments would not be considered received by the annuitant.

XXXXXXXXXX 							M.P. Sarazin

Attention: XXXXXXXXXX

June 1, 2000

Dear Sirs:

Re: Withdrawal under the Lifelong Learning Plan

This is in reply to your letter dated March 29,2000, wherein you requested clarification regarding the maximum withdrawal under the Lifelong Learning Plan ("LLP") described in section 146.02 of the Income Tax Act (the "Act"). Specifically, you are referring to redemption fees incurred when a mutual fund is redeemed within a time period to which redemption fees would apply, such as under a deferred sales charge arrangement.

Comments

Paragraphs (c) and (d) of the definition "eligible amount" in subsection 146.02(1) of the Act limit the amount that an individual may receive under the LLP. The paragraphs refer to the amounts received by the individual and, as such, we would only look at the amount paid to the individual out of the RRSP.

The determination of whether a cost is incurred by an RRSP or by the annuitant is a question of fact that can only be determined after a review of all of the facts related to the particular cost. However, in our view, any commission costs incurred by an RRSP in respect of the liquidation of its investments would be considered costs related to the acquisition and disposition of property by the RRSP. The fact that the liquidation is required to fund the annuitant's participation in the LLP would not result in the commissions being considered costs incurred by the annuitant. Consequently, these costs would not be considered in determining the amount received by an individual under the LLP as they are expenses of the RRSP.

For example, an RRSP redeeming a mutual fund in the amount of $10,526 that charges a 5% deferred sales charge would incur an expense of $526, leaving $10,000 in cash available to be paid to the annuitant of the RRSP. In this situation, the annuitant would be considered to have received $10,000 and not $10,526.

The amount to be repaid to the RRSP in order to avoid having an income inclusion in respect of the amounts withdrawn from the RRSP is the amount received. To continue the above example, $10,000 would have to be eventually repaid to the RRSP in order to avoid an income inclusion under the LLP.

We trust these comments will be of assistance.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate