8 July 1996 External T.I. 9619315 - RRSP EXPENSES 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 or by a third party a gift

Position:

		If paid by annuitant its a premium if paid by a third party it would be a gift.

Reasons:

		Follows prior opinions.

XXXXXXXXXX			5-961931

Attention: XXXXXXXXXX

July 8, 1996

Dear Sirs:

Re: Payment of RRSP expenses by Annuitants and Other Parties

This is in reply to your letter of May 21, 1996, wherein you requested we clarify whether certain costs or charges of a trusteed RRSP can be paid from outside the plan. In particular you wish to know what the consequences would be if taxes on excess foreign property and commissions on the purchase of securities are paid by the annuitant of the RRSP or by a third party such as a broker or Financial advisor.

The Department's position with respect to the payment of expenses of an RRSP trust (including any taxes payable by the RRSP in accordance with subsection 206(2) of the Income Tax Act (the "Act") by the annuitant of the RRSP or by the spouse of the annuitant is as follows:

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.

If such amounts are paid by someone other than the annuitant of the RRSP or the spouse of the annuitant, the payments will be considered to be gifts to the RRSP.

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