1993 External T.I. 9335295 F - Deductibility of RRSP Administration Fees

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:

Whether mortgage administration fees and fees for custody of securities are proper expenses of the RRSP annuitant or RRSP trust.

POSITION TAKEN:

They are expenses of the trust and not deductible by the annuitant.

REASONS FOR POSITION TAKEN:

Wording of 20(1)(bb).

LEGAL:

N/A

FINANCE OPINION:

N/A

JURISPRUDENCE:

N/A

RCT PUBLICATIONS:

IT-238R2, paras. 4 and 7; contra "Administration Costs" commentary at pg. 32 of 1993 RRSP and Other Registered Plans for Retirement Guide.

HAA NUMBER:

7255 - 1

XXXXXXXXXX

933529

Attention:  XXXXXXXXXX

January 6, 1994

Dear Sirs:

RE:  Deductibility of RRSP Investment Administration Fees

This is in reply to your letter of November 23, 1993, in which you ask us for clarification concerning the Department's position on the above- noted matter.

As you indicate, the Department's position is published in Interpretation Bulletins IT-124R5 (paragraph 2) and IT-238R2 (paragraph 7), and in addition there is a discussion of the topic on page 32 of the 1993 RRSP and Other Registered Plans for Retirement Tax Guide.

There is a further comment at page 12 of the 1992 T4RSP Guide.

To summarize these statements:

Reasonable administration fees paid by the annuitant to the trustee are deductible in computing income or loss pursuant to section 9 of the Income Tax Act (the "Act"), not being disallowed by section 18 of the Act. If the fee is paid with funds in the RRSP, no deduction may be taken by the annuitant. Such administration fees would be for services normally provided by a trustee to the annuitant and relate to the overall direction and administration of the affairs of the RRSP trust.

Fees for investment counsel advice and services are deductible, pursuant to paragraph 20(1)(bb) of the Act, if related to the buying or selling and administration or management of shares or securities "of the taxpayer". It is our view that the taxpayer claiming the expense must be the legal owner i.e. the RRSP trustee. If the annuitant paid these fees on behalf of the RRSP trust, the payment would be a gift made to the RRSP within the meaning of subparagraph 204.2(1.2)I(b) of the Act and included in the calculation of "undeducted RRSP premiums" for purposes of the Part X.1 tax. With respect to your comment concerning mortgage administration fees, if an annuitant paid such a fee, no deduction would be allowed and the annuitant will be considered to have made a gift to the RRSP.

It is a question of fact whether any particular fee relates to a service provided to the owner of the investment or relates to the administration and operation of the RRSP trust. We, therefore, are unable to provide further guidance concerning the deductibility of expenses for the specific services described in your letter beyond what is already provided in the publications cited above.

The foregoing comments are an expression of opinion only and are not binding on the Department. We trust, however, that they are helpful.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate