15 October 2001 External T.I. 2001-0086785 - RRSP "DEREGISTERED" BY ISSUER

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Can an RRSP issuer "deregister" an RRSP trust if the RRSP administration fees are not paid?

Position: This is not governed by the Income Tax Act.

Reasons: The rights and obligations of the issuer are as set out in the declaration of trust.

XXXXXXXXXX 2001-008678
S. E. Thomson
October 15, 2001

Dear XXXXXXXXXX:

Re: Mortgage in Self-Directed RRSP

This is in reply to your letter of February 23, 2001 to the Surrey Tax Centre, which was forwarded to us by the Registered Plans Directorate on June 1, 2001. We apologize for the delay in responding to your questions.

In your letter, you explain that you have received a letter from the issuer of your self-directed registered retirement savings plan ("RRSP"). The issuer plans to "deregister" the RRSP if the fees are not paid. The RRSP consists only of a mortgage on real property situated in Canada, which mortgage is now in default. You have asked us the following questions:

1) Does the issuer have the right to "deregister" the RRSP?

2) What are the tax repercussions if the plan is deregistered?

3) What value should be placed on the mortgage?

OUR COMMENTS

Where a particular transaction is ongoing, or has been completed, a determination of the tax consequences is the responsibility of the local tax services office. However, we are able to offer the following general comments on the relevant provision of the Income Tax Act (the "Act"), which may apply. Please note that these comments are general in nature, and may or may not apply in your situation. As such, the comments are not binding on the Canada Customs and Revenue Agency (the "CCRA").

1) Whether an issuer has the right to "deregister" an RRSP trust is not governed by the Act. Rather, the rights and obligations of the issuer are as set out in the declaration of trust between the issuer and the annuitant. In our experience, normally a plan would not provide for this.

2) If all of the assets of an RRSP are removed from the trust (by transferring them to the annuitant, for example), the RRSP may be closed. The transfer will be considered to be a withdrawal by the annuitant, and the fair market value of the assets must be included in the annuitant's income. The issuer must prepare a T4RSP for this amount.

3) To determine the fair market value of an asset in the RRSP trust, the trustee would have to consider all of the factors related to the asset. The CCRA does not provide valuation services or give rulings on the value of properties; however, the trustee may contact the Valuations Section of its tax services office to discuss the valuation procedures if it has concerns.

We trust that we have been of some assistance.

Yours truly,

Roberta Albert, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate