10 March 1999 External T.I. 9833885 - RESP, DEATH OF SUBSCRIBER

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: Can a surviving spouse claim an exemption from Part X.5 taxes for amounts contributed to an RRSP and claimed as a deduction under 146(5) of the Act?

Position: Question of Fact.

Reasons: The surviving spouse only qualifies if the RESP does not have a subscriber at the time that the accumulated income payment is made.

XXXXXXXXXX 983388
M. P. Sarazin
Attention: XXXXXXXXXX

March 10, 1999

Dear Sirs:

Re: Death of a Registered Education Savings Plan (“RESP”) Subscriber

This is in reply to your letter dated September 19, 1998, which was sent to the Registered Plans Division and forwarded to us on December 29, 1998, wherein you requested confirmation of your understanding of the application of section 146.1 of the Income Tax Act (the “Act”), as described in the Registered Education Savings Plan Information Sheet (RC4092(E)), where a subscriber dies and there is no continuation of the RESP.

Your views

For RESP contracts made after 1997, payments out of an RESP will constitute either a refund of payments, an educational assistance payment or an accumulated income payment. The expressions “refund of payments”, “educational assistance payment” and “accumulated income payment” have the meanings assigned by subsection 146.1(1) of the Act.

Where a subscriber dies and the RESP will not be continued, the terms of the RESP will determine who is entitled to payments under the RESP. If the RESP provides for it, the refund of payments and the accumulated income payment could be paid to the subscriber’s estate, the subscriber’s surviving spouse or to a beneficiary of the subscriber’s estate. In any case, the accumulated income payment will be included in the recipient’s income in the year that the income is received. In addition, the accumulated income payments will, unless it is specifically excluded, be subjected to tax under Part X.5 of the Act.

The accumulated income payment or a portion thereof may be excluded from the taxes under Part X.5 where the amount is contributed to a registered retirement savings plan (“RRSP”) and deducted under subsection 146(5) or 146(5.1) of the Act in computing the surviving spouse’s income for the year that the accumulated income payment is received. This exclusion of the accumulated income payment from an RESP for deducted contributions to RRSPs is only available to the subscriber of the RESP or the person who was the spouse of the subscriber of the RESP under which there is no subscriber at that time.

Comment

We confirm that your understanding of the treatment of the payments from an RESP after the death of the subscriber, as described above, is correct.

We trust that the above comment will be of assistance to you.

Yours truly,

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

c.c. Robin Stong

Registered Plans Division