7 September 1995 Internal T.I. 9521007 - RRSP BENEFIT ADVANTAGE LOW INTEREST LOAN

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:

is there a benefit or tax advantage derived from proposed arrangeemnt

Position TAKEN:

proposed transaction opinion given that benefit exists, an advantage may exist and rrsp may be cancelled

Reasons FOR POSITION:

general opinion subject to legal opinion if ruling requested

			September 7, 1995

	Saskatoon Tax Services Office	Headquarters
W. C. Harding
	Attention:  A. Pedley			(613) 957-8953
			7-952100

Advantages and Benefits from RRSP's Investments

This is in reply to your Facsimile submission of August 3, 1995, concerning the potential tax implications that may result from a transaction referred to you by the XXXXXXXXXX.

In general, questions concerning actual fact situations should be replied to by the tax services office while written confirmation of the tax implications of proposed transactions should be given by this Directorate. However, neither office should provide specific comments with respect to proposed transaction where they are not submitted with all relevant details and where the transactions are not outlined in a properly submitted advance income tax ruling request. Accordingly, since the scenario detailed in the trust company's letter appears to be a factual proposed transaction, we are only prepared to provide the following general comments that may or may not apply to the situation described.

In our opinion a right to an amount will exist where one person waives his or her right to the amount in favour of another. Accordingly, if an RRSP trustee waives its right to receive an amount of interest in favour of the annuitant of the RRSP, a benefit to the annuitant taxable in accordance with the provisions of 146(8) of the Income Tax Act (the "Act") could arise. We are also of the opinion that, in some circumstances, an advantage as described in paragraph 146(2)(c.4) of the Act could exist in addition to any benefits referred to above. In particular, we note that the type of advantage sought through the proposal could not ordinarily be obtained without the use of an RRSP. Finally, it is our opinion that the use of the property of the RRSP that is not consistent with the definition of an RRSP as found in subsection 146(1) of the Act could result in the application of subsection 146(12) of the Act. In particular the subsection could apply if it is concluded that payments to an RRSP are not being made for the purpose of providing a retirement income to the annuitant at the maturity of the RRSP.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch