24 May 1996 External T.I. 9524235 - RRSP EXPENSES PAID TO THIRD PARTY BY ANNUITANT

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 the payment of RRSP expenses by annuitant a gift

Position:

It can be but in most cases it will be a premium payment.

Reasons:

It is question of fact whether amounts paid are gifts or premiums.

XXXXXXXXXX 5-952423

Attention: XXXXXXXXXX

May 24, 1996

Dear Sirs:

Re: Gifts to an RRSP

This is in reply to your letter of August 31, 1995, wherein you requested we confirm that if a spouse of an RRSP annuitant pays investment counsel fees in respect of the annuitant's RRSP, the amount paid will not be included in the calculation of the annuitant's "undeducted RRSP premiums" as defined in subsection 204.2(1.2) of the Income Tax Act (the "Act") or in the spouse's undeducted RRSP premiums.

In response to the concerns raised in your letter we have done a complete review of our position concerning the treatment of expenses of an RRSP when paid by the annuitant of the RRSP or by the spouse of the annuitant of the RRSP. In consequence we have now adopted the following positions:

1.Amounts paid by an annuitant or the spouse of an annuitant in respect of the expenses of the annuitant's RRSP are premiums as defined under subsection 146(1) of the Income Tax Act (the Act) for purposes of both section 146 and part X.1 of the Act.

2.Amounts paid by the annuitant of an RRSP in respect of the expenses of the RRSP will not be treated as gifts to the RRSP.

3.The above treatment will be applicable to any amounts paid in respect of the expenses of an RRSP whether the amounts are paid directly to the provider of the service for which the expense was incurred or as a reimbursement of amounts paid by the RRSP or its administrator.

Please note that the expenses being considered here are those that are expenses of the RRSP such as administration or management fees of the property in an RRSP trust, commissions, acquisition fees and brokerage fees. They do not include fees that are properly expenses of the annuitant of the RRSP such as administration fees that relate to the overall direction and management of the affairs of the RRSP and are the type of services normally provided by an administrator or trustee of an RRSP to the annuitant. With respect to these latter expenses, it remains our position that reasonable administration fees paid by an annuitant to the trustee or administrator of an RRSP are expenses of the annuitant but will no longer be deductible in computing income from property if the March 6, 1996 Budget proposal is passed.

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
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch