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 TAKEN:Routine Reply
952026
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
August 15, 1995
Dear Sirs:
Re: Registered Retirement Savings Plan ("RRSP") Withdrawals
This is in reply to your letter dated July 18, 1995, in which you asked what amount should withholding tax be based on when an amount is withdrawn from an RRSP.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 that the withdrawal proceeds come from the redemption of specific units or shares of a mutual fund and the mutual fund has a "back end load" feature whereby there is a charge for such redemption.
When an RRSP holds shares or units of a mutual 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.
In any case, an annuitant must include the amount received out of the RRSP, before withholding taxes, in his or her income for the taxation year under the provisions of subsection 146(8) of the Income Tax Act (the "Act"). The value of an amount withdrawn from an RRSP is the fair market value, before withholding taxes, of the property distributed by the RRSP. If the withdrawal is made in cash the value is simply the amount paid to the annuitant before withholding taxes. 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 before withholding taxes. Consequently, the T4RSP should reflect the fair market value of the property distributed to the annuitant out of the RRSP before withholding taxes.
The withholding tax would be calculated by multiplying the fair market value of the property to be distributed to the annuitant by the appropriate rate of withholding taxes determined in accordance with the provisions of section 103 of the Income Tax Regulations.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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