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:Valuation of withdrawal from rrsp
Position TAKEN:Value at FMV
Reasons FOR POSITION:Routine reply
XXXXXXXXXX 5-942065
Attention: XXXXXXXXXX
September 21, 1994
Dear Sirs:
Re: Withdrawals from Registered Retirement Savings Plans ("RRSPs")
This is in reply to your letter of August 10, 1994, in which you asked what amount should withholding tax be based on when an amount is withdrawn from an RRSP. In particular you are concerned with the situation where an annuitant requests a withdrawal of an amount from an RRSP that is invested in shares or mutual funds and incurs early redemption or other fees in respect of the redemption of the shares or units.
The value of an amount withdrawn from an RRSP is the fair market value of the amount withdrawn. If the withdrawal is made in cash the value is simply the amount paid to the annuitant before withholding tax. If the withdrawal is paid out in the form of some other property, the withdrawal is equal to the fair market value of the property distributed.
When an RRSP holds shares or units of a fund and incurs costs on the redemption of those units, the costs incurred are expenses of the trust and are not deductible by the annuitant in computing taxable income. However, the payment of the costs by the trust will reduce the amount held in the RRSP that is available for withdrawal. For example, if an RRSP that holds $5,000 in mutual fund units is terminated and the trust incurs a $200 early redemption fee, the net amount available for distribution would be $4,800. Withholding tax would then be based on this amount when it is paid to the annuitant.
The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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