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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sir\Madam:
RE: Retirement Compensation Arrangement ("RCA")
We are writing in reply to your letter of January 28, 1993, in which you ask several questions concerning the use of letters of credit held by a trustee to fund a RCA. The first question was forwarded to our Winnipeg Fiscal Center to the attention of Mr. Kewin LLoyd ((204) 984- 2971) for reply.
A letter of credit is in principle an undertaking by a banker to meet drafts drawn under the credit by the beneficiairy of the credit in accordance with the conditions laid down therein. We are of the view that the renewal of a letter of credit issued on a renewable basis does not constitute the disposition of a property for the trust under the RCA. Therefore, a fee incurred for the issuance of a letter of credit does not constitute a capital loss upon the renewal of the said letter of credit.
It is our view that a payment by a bank to an RCA, to pay a benefit, under a letter of credit issued by the bank is a payment (contribution) on behalf of the employer. This payment must be included under line 7 of the T3RCA return. If the amount is distributed in the same year, it will be included under lines 19 or 20 of the T3RCA.
Our comments are an expression of opinion only and are not binding on the Department as explained in paragraph 21 of Information Circular 70- 6R2. We trust, however, that they are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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