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.
Revenu Canada Taxation Head Office
M.E. Bartley (613) 995-0051
April 26, 1985
XXXX
We reply to your letters of March 6 and April 11 regarding the calculation of amounts payable each year to an individual under a registered retirement income fund (RRIF).
You propose that the value produced by the formula
i
--------------
1 - (1+i)-n
--------------
1+i
applied to the value of the plan at the beginning of the year should be used to satisfy subparagraph 146.3(1)(f)(i) of the Income Tax Act. In this connection you would limit "i" to values of from 1 to 6 and "n" to a value equal to 90 minus the age in whole years of the individual at the beginning of the particular year.
You described the formula as one used by life insurance companies to compute payments under an immediate payment annuity. You did not say so but we assume that its application would exhaust the fund upon equal annual payments having been made.
We note that the annuitant under the RRIF may designate any interest factor up to 6 in respect of each year and therefore it is our opinion that the range for i may be from 0 to 6. In fact the formula depends upon giving i some value however small and as a consequence it is our opinion that to that extent the formula fails to satisfy subparagraph 146.3(1)(f)(i) of the Act. You advised us by telephone that for an annuitant who selects an interest rate of zero you compute the annual payment as 1 ------- x value of the plan at the beginning of the year. 90 - n
Taking into account the earlier assumption which we made and our comments concerning the value of i in certain circumstances, it is our opinion that the formula is acceptable for the purposes of subparagraph 146.3(1)(f)(i) of the Act.
Yours truly,
for Director Non-Corporate Rulings Division 146.3(1)(f)
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