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.
Principal Issues:
Investment Counsel fees
Position TAKEN:
General comments
Reasons FOR POSITION TAKEN:
XXXXXXXXXX 941444
July 4, 1994
Dear Sir:
Re: Paragraph 20(1)(bb) of the Income Tax Act (the "Act")
We are writing in response to your letter of May 20, 1994 in which you requested our opinion as to the deductibility of certain fees paid for investment counsel service.
Written confirmation of 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 dated September 28, 1990 ("IC-70-6R2").
However, we offer the following general comments to your inquiry.
As stated in paragraphs 1 and 2 of IT-238R2, "Paragraph 20(1)(bb) allows a taxpayer to deduct fees, other than commissions, paid for advice on buying or selling a specific share or security by the taxpayer or for the administration or management of shares or securities......Provided the amounts are reasonable, the total fees paid will be deductible....".
As to whether amounts are reasonable is a question of fact that can only be determined from a review of the particular transaction. In determining whether a fee is reasonable, the amount of time spent and the type of work done by the person providing the advice or service will be taken into consideration.
For purposes of paragraph 20(1)(bb) of the Act a person includes a corporation.
With respect to investment counsel fees and RRSP's 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 paragraph 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.
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.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of IC-70-6R2 and are not binding on Revenue Canada, Taxation.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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