6 May 1993 External T.I. 9309075 F - Registered Education Savings Plan - Maximum Payments

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 XXXXXXXXXX

RE:  Registered Education Savings Plans ("RESP")

This is in response to your letter of March 22, 1993, in which you ask questions in respect of the maximum payments that can be made to an RESP in respect of a beneficiary for a year.

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 ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The foregoing comments are, therefore, of a general nature only, are not binding on the Department.

Subsection 146.1(2) of the Income Tax Act (the "Act") sets out the requirements for registration of an educational savings plan. Paragraph 146.1(2)(k) of the Act provides that payments to an RESP in respect of a beneficiary for a year cannot exceed $1,500 ($1,500 per year for 21 years) for plans entered into after February 20, 1990.

After January 1990, section 204.91 of the Act imposes a monthly tax on a subscriber equal to 1% of the subscriber's share of the "excess amount" in the RESP at the end of a month. This special tax in respect of over-contribution to an RESP was introduced to ensure compliance with paragraphs 146.1(2)(k) and 146.1(2)(h) of the Act. A penalty may apply where payments in a year to an RESP in respect of a beneficiary after February 20, 1990, exceed $1,500 (146.1(2)(k)) or where the payment causes the total of all payments for the beneficiary to exceed the lifetime limit of $31,500 (146.1(2)(h)).

Subsection 204.92 of the Act provides that an individual is to file a return, estimating the tax payable by him or her under this Part, and pay the applicable tax within 90 days after the end of the year. Subsection 204.93 provides that the provisions of the Act dealing with the filing of returns, assessments and reassessments, interest, penalties and appeals apply to this Part with the required modifications.

Subsection 146.1(13) of the Act provides that the registration of an RESP can be revoked at the discretion of the Minister at any time that the plan ceases to comply with the registration requirements stated in subsection 146.1(2) of the Act. Upon revocation, the trust loses its special status and becomes subject to tax on its accumulating income in the manner of all inter vivos trust. The subscriber in turn is required by 146.1(14) of the Act to include certain amounts in his income for the year in which revocation occurs.

We trust this is satisfactory. If you have any further questions, do not hesitate to contact us.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate