26 July 1989 Income Tax Severed Letter 5-8313

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.

• 5- 8313 F. Francis (613) 957-3496

XXX

July 26, 1989

Dear Sirs:

Re: Trustees' right of Offset Against
Registered Retirement Savings Plans ("RRSP")

This is in reply to your letter of June 28, 1989 wherein you requested our opinion in respect of the above-captioned item.

It is our understanding that your firm, XXX XXX acts as trustees of numerous RRSPs XXX has identified certain planholders whom it has been unable to locate for approximately 3 years. You have advised us that these planholders have nominal amounts in their RRSP accounts, have no other deposits with XXX and have outstanding loans with XXX with balances that are in excess of the balance in their RRSP accounts.

XXX propose to exercise a trustee's right of offset and offset the annuitants' RRSP balances against their indebtedness to XXX You have noted that there is nothing in the Declaration of Trust for RRSPs that would deny the trustee the right of offset.

As stated in our Information Circular 70-6R dated December 18, 1978, we do not give opinions in respect of specific proposed transactions other than as a reply to an advance income tax ruling request. However, we will offer the following general comments.

We direct your attention to paragraph 146(2)(a) of the Income Tax Act (the "Act") wherein it states that the RRSP must not provide for the payment of any benefit before maturity except for a refund of premiums or a payment to the annuitant. It should be noted that the term "benefit" is defined under paragraph 146(1)(b) of the Act and includes any amount received out of or under a RRSP with the exception of specific exclusions described under subparagraph 146(1)(b)(i), (ii) and (iii) of the Act. Since the payment out of an RRSP to the trustee under the exercise of the right of offset would not fall within the foregoing exclusions, the payment would be considered as a payment of a benefit before maturity to a person other the annuitant. It is therefore our view that a general right to offset in respect of the property of an RRSP would be contrary to the provisions under paragraph 146(2)(a) of the Act.

We regret that our reply could not be more favourable.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate