15 April 1996 External T.I. 9606165 F - REFUND OF PREMIUMS

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:

Refund of premiums - Meaning of financial support

Position:

Question of fact

Reasons:

Routine

									5-960616
XXXXXXXXXX							G. Martineau

Attention: XXXXXXXXXX

April 15, 1996

Dear Sirs:

Re: Refund of Premiums

This is in reply to your letter of February 15, 1996, concerning the definition of refund of premiums after the death of the last annuitant of an registered retirement income fund ("RRIF").

An amount paid directly from a RRIF to a grandchild after the last annuitant's death is a designated benefit that would be refund of premiums if the RRIF had been an unmatured registered retirement savings plan. The last annuitant must not have a spouse and the child must be financially dependant on the annuitant at the time of his death.

With respect to this "financially dependant" requirement, subsection 146(1) of the Act provides that it shall be assumed, unless the contrary is established, that the child was not financially dependant on the annuitant for support at the time of the annuitant's death if the income of the dependant for the taxation year preceding the taxation year in which the annuitant died exceeded the amount used under paragraph (c) of the description of B in subsection 118(1) of the Act for that preceding year. If the annuitant died in 1995, the child is not considered to be financially dependant if his income for 1994 is over $6,456.

Where it can be established that the assumption referred to above is not applicable, an amount paid would be a designated benefit only if it can be substantiated that the grandchild was financially dependant on the deceased annuitant at the time of his death. Gifts or contributions to an Registered Education Savings Plan do not constitute support where they merely enhance or supplement the already adequate life style of the grandchild. The question of financial dependency is a question of fact which must be determined on the facts of each case. The following factors may be considered in determining if a person was financially dependant on a deceased annuitant for support:

a)the income of the person from all sources;

b)the cost of living and the ability of the person to provide for self-support; and

c)any support provided to the person by other persons.

The financial support by the deceased annuitant may be partial.

The above comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. We trust, however, that they are of assistance.

Yours truly,

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