22 April 1992 Income Tax Severed Letter 9210335 - Deductibility of Annual Administration Fees by RRSP/RRIF Annuitants

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.

SUBJECT: Deductibility of Annual Administration Fees by RRSP/RRIF
ANNUITANTS SECTION: 146, 18(1)(a), 20(1)(bb)]

5-921033
XXX M.P. Baldwin
(613) 957-8953

Attention: XXX

April 22, 1992

Dear Sirs:

Re: Deductibility of Annual Administration Fees by RRSP/RRIF Annuitants

This is in reply to your letter of April 1, 1992 requesting a technical interpretation with respect to the tax deductibility of an annual mortgage fee paid by the annuitants of RRSP and RRIFs from funds outside such plans.

Paragraph 18(1)(a) of the Income Tax Act (the "Act") sets out the general test for the deduction of an expense and requires, amongst other things, that the expense be" ...incurred by the taxpayer...". Accordingly, it is the Department's position that reasonable administration fees paid by an annuitant of a plan to the trustee of a plan are considered to be deductible expenses in computing income from property. Such administration fees would relate to the overall direction and management of the affairs of the plan trust and are the type of services normally provided by a trustee to the annuitant. Services such as investment counselling, commissions, acquisitions fees or brokerage fees etc., are not considered to be included as part of the administration fee.

Paragraph 20(1)(bb) of the Act requires that to be deductible, payments be made by the taxpayer for advice to him as to the advisability of purchasing or selling specific shares or securities for the taxpayer or for services in respect of the administration or management of shares or securities of the taxpayer. It is the Department's position that the advice or services must be provided directly to the taxpayer and not to some other party. Although it is not necessary that such shares or securities be in the custody of the taxpayer it is our view that both the legal and beneficial ownership must belong to the taxpayer claiming the deduction.

Based on the above discussion, the trustee who pays the annual mortgage administration fees would be entitled to a reimbursement for expenses reasonably and properly incurred. In the event that the annuitant of the plan paid the mortgage administration fees personally, he would not be entitled to a tax deduction but would be considered to have made a gift to the plan.

We trust that the above comments will be of assistance.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch