9 April 2008 External T.I. 2007-0262171E5 - RESPs and EAPs

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.

Principal Issues: Would a payment to a beneficiary from an RESP in respect of past educational expenses incurred when previously enrolled at a post-secondary educational institution be an educational assistance payment

Position: Question of fact. In general, and based on the example in the letter, no.

Reasons: Definition of educational assistance payment in subsection 146.1(1) and provisions of subsection 146.1(2).

XXXXXXXXXX 								2007-026217
G. Allen
April 9, 2008

Dear XXXXXXXXXX :

Re: Educational Assistance Payments

This letter is in response to your letter dated December 4, 2007 concerning whether an educational assistance payment (EAP) may be paid from a registered education savings plan (RESP) in respect of a beneficiary's current and past post-secondary education. In your letter, you provide an example where a beneficiary is currently enrolled at a post-secondary educational institution (PSEI) and was previously enrolled at a PSEI during the years XXXXXXXXXX and XXXXXXXXXX .

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature and are not binding on the Canada Revenue Agency (CRA).

Our Comments

An EAP is defined in subsection 146.1(1) of the Income Tax Act (the "Act") to be an amount, other than a refund of payments, paid out of an education savings plan to an individual to assist the individual to further the individual's education at a post-secondary school level. It is generally assumed that a course is at a post-secondary school level if the ministry of education for the province or territory in which the course is given considers it to be at that level. Further, every time an EAP is paid from an RESP, the conditions of paragraph 146.1(2)(g.1) of the Act must be satisfied at the time the EAP is made.

Based on the definition of EAP, in our view, in the example above, it would not be possible to currently pay an EAP in respect of past educational expenses incurred by a beneficiary during the years XXXXXXXXXX and XXXXXXXXXX . However, provided the conditions of paragraph 146.1(2)(g.1) are satisfied, it would be possible to currently pay an EAP in respect of educational expenses that are for the purpose of assisting the beneficiary to further the beneficiary's education at the current PSEI.

If at the time an amount is paid out of an RESP to an individual, the amount is not paid to assist the individual to further the individual's education at a post-secondary school level, the amount paid would not by definition be an EAP. The amount would therefore be a refund of payments and/or an accumulated income payment paid out of an RESP and be treated for tax purposes accordingly.

We trust our comments will be of assistance to you.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch