4 March 1999 External T.I. 9900455 - TRANSFERS OF FUNDS TO AN RESP

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: How to transfer funds to an RESP.

Position: General comments on this issue were provided.

Reasons: Specific replies can only be provided in respect of ruling requests.

XXXXXXXXXX
				990045
March 4, 1999			W.C. Harding

Dear XXXXXXXXXX:

Re: Transfer of Funds to a Registered Education Savings Plan ("RESP")

This is in reply to your facsimile of January 10, 1999, in which you asked about the taxation requirements with respect to the transfer of funds to an RESP.

Since your enquiry deals with an actual proposal transfer of funds to an RESP, we cannot provide written confirmation of the tax implications unless a request is made for an advance income tax ruling as set out in Information Circular 70-6R3. However, we can provide the following general comments which may be of assistance to you.

It is a question of fact whether an arrangement commonly referred to as an "in-trust" account is a trust for tax purposes. However, where such an arrangement is a trust, it must be administered in accordance with any legislation applicable to trusts. Because of the definition of an "education savings plan" in subsection 146.1(1) of the Income Tax Act (the Act) a trust cannot enter into an RESP contract. Therefore it is not possible for a trust to act as an RESP subscriber and transfer funds to an RESP.

While a trust cannot be a subscriber to an RESP, the provisions of the Act do not prevent minors from being subscribers to RESPs. This may mean a child who is the beneficiary of a trust might be able to be a subscriber to an RESP and contribute funds held in the trust to it. However, we understand that other non-tax legislation affects the ability of a minor to enter into a contract (including an RESP contract).

Whether a minor can receive funds out of a trust or transfer funds held in a trust to the minor's parents for the purpose of contributing them to an RESP is also a question not covered by the Act but one which may be addressed in other legislation and in the trust documents. Furthermore, the consequences to a trust and a child from entering into such a transaction would best be considered after the ability to undertake the transaction is determined by the trustee. However you may wish to review the Department's position on payments out of trusts for the benefit of minors published in the enclosed Income Tax Technical News No 11 dated September 30, 1997.

We trust these comments will be of assistance.

Yours truly,

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

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