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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
DOCUMENT TYPE: Opinion - 2002-012907
Principal Issues:
Can early redemption charges incurred on the transfer of assets from one RRIF to another be paid by the annuitant under the plans?
Position:
No
Reasons:
An early redemption charge incurred by a RRIF in respect of the redemption of its investments is considered a cost related to the disposition of its property. Such costs are RRIF costs and they can not be paid by the annuitant.
XXXXXXXXXX 2002-012907
Karen Power, CA
(613) 957-8953
May 8, 2002
Dear XXXXXXXXXX:
Re: Early Redemption Fees and Registered Retirement Income Funds ("RRIF")
We are writing in reply to your letter of March 15, 2002, requesting our comments concerning early redemption charges incurred on a transfer of assets from one RRIF carrier to another RRIF carrier.
Where an annuitant has requested a transfer of property from one RRIF carrier to another RRIF carrier and the first RRIF carrier has to redeem investments resulting in early redemption charges before transferring the property, you ask whether the annuitant can pay the early redemption charges through a reduction of the minimum amount withheld by the first RRIF carrier or by a direct payment of the early redemption charges
In our view, an early redemption charge incurred by a RRIF in respect of the early redemption of an investment is considered a cost related to the disposition of the particular property. This cost is considered an expense of the RRIF and, as such, the cost can not be paid by the annuitant under the RRIF.
Under the terms of its registration, a RRIF cannot accept property as consideration thereunder other than property transferred in accordance with subparagraphs 146.3(2)(f)(i) to (vii) of the Act. If the annuitant pays the early redemption charges on behalf of the RRIF, the payment will be viewed as a contribution to the RRIF resulting in an amended plan and a deemed revocation of the plan in accordance with subsection 146.3 (11) of the Act.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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