5 November 1999 External T.I. 9920585 - REIMBURSE REDEMPTION FEES, RRSP

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: Would the reimbursement of fees associated with the early redemption of mutual funds held by an RRSP constitute a prohibited advantage under paragraph 146(2)(c.4) where the property in the RRSP is being transferred into an insurance company's insured RRSP?

Position: No

Reasons: The reimbursement into the RRSP trust is simply earnings of the RRSP and is not an advantage, benefit or contribution.

XXXXXXXXXX 992058
M. P. Sarazin
Attention: XXXXXXXXXX

November 5, 1999

Dear Sirs:

Re: Reimbursement of Mutual Fund Redemption Fees

This is in reply to your letter dated July 23, 1999, wherein you requested our views relating to the reimbursement of redemption fees charged by mutual funds held in a registered retirement savings plan ("RRSP") trust.

You refer to the situation where funds held in a trust governed by an RRSP are transferred into an annuity offered by the insurance company that qualifies as an RRSP and the insurance company reimburses the RRSP trust for its mutual fund redemption fees incurred as a result of the transfer.

Comments

We are of the view that redemption fees related to investments held by an RRSP are considered expenses of the RRSP. Consequently, where an issuer provides an incentive in the form of a reimbursement of early redemption fees related to mutual funds held by the RRSP, the reimbursement would be considered income earned by the RRSP in respect of the particular investment. In our opinion, provided the reimbursement is paid into the RRSP and not to the annuitant under the RRSP, the payment would not be considered to be an advantage pursuant to paragraph 146(2)(c.4) of the Income Tax Act (the "Act") and it would not constitute income to the annuitant. In addition, it would not be considered a contribution to the RRSP by or on behalf of the annuitant.

We trust the above comments will be of assistance to you.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate