12 June 2003 Income Tax Severed Letter 2003-0159505 - Payment of RRSP expenses and taxes

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.

SUMMARY: Payment of RRSP expenses and taxes—ITA-146(5), 204.1(1), 204.2(1)—Whether the payment of RRSP expenses and taxes by the annuitant or other parties is a premium or gift.

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: Is the payment of RRSP expenses and taxes by the annuitant or other parties considered to be a premium or gift

POSITION: Yes, if paid by annuitant it would be a premium and if paid by another party it would be a gift. However ATR-24 could apply in some case but it would be a question of fact in which cases.

REASONS: Provision of law

XXXXXXXXXX 2002-015950

M.P. Baldwin, CA

June 12, 2003

Dear XXXXXXXXXX:

Re: Payment of RRSP expenses and taxes by the annuitant or other parties

This is in reply to your letter of August 22, 2002 requesting a technical interpretation on the payment of a registered retirement savings plan's (“RRSP”) Part XI tax or a small overdraft charge by the Investment Advisor when the dealer or Investment Advisor has made an error that created Part XI tax or overdraft from interest being charged to the account. You would like to know if these charges can be paid to the RRSP without any tax consequences or whether the payment of these charges would be considered a gift to the RRSP.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. For more information concerning advance tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. Copies of information circulars and other publications are available at your local Tax Services Office or on the internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.

The Canada Customs and Revenue Agency's (the “Agency”) position with respect to the payment of expenses of an RRSP trust such as commissions, acquisition fees, brokerage fees and any taxes payable by the RRSP in accordance with subsection 206(2) of theIncome Tax Act(the “Act”) (Part XI) by the annuitant of the RRSP or by the spouse of the annuitant is as follows:
• 1) Amounts paid by the annuitant or the spouse of an annuitant in respect of the expense of the annuitant's RRSP are premiums as defined under subsection 146(1) of the Act for purposes of both section 146 and Part X.1 of the Act. Consequently, amounts paid by the annuitant of an RRSP in respect of the expenses of the RRSP will not be treated as gifts to the RRSP.
• 2) The above treatment will be applicable to any amounts paid in respect of the expenses of an RRSP whether the amounts are paid directly to the provider of the service for which the expense was incurred or as a reimbursement of amounts paid by the RRSP or its administrator.

If such amounts are paid by someone other than the annuitant of the RRSP or the spouse of the annuitant, the payments will be considered to be gifts to the RRSP.

When a particular situation involves a proposal to settle a dispute with a client regarding damages claimed by the RRSP, we would refer you to Advance Tax Ruling ATR-24. In this case, amounts were paid into the RRSP without being considered premiums or gifts. However, the determination of whether the position in ATR-24 would be applicable to a particular fact situation could only be determined in the context of an advance income ruling and a thorough review of the relevant facts of the particular situation.

We trust that these comments will be of assistance to you.

Yours sincerely,

M.P. Sarazin, CA

for Director

Financial Industries Division

Income Tax Rulings Directorate