12 August 1997 External T.I. 9710945 - RRSP, INVESTMENT COUNSEL FEES

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:

Who should pay for investment counsel fees relating to RRSps?

Position:

Investment counselling fees relate to advice provided to the annuitant or advice provided directly to the RRSP as requested by the annuitant for investment strategies and we are of the view that generally such expenses are expenses of the annuitant.

Reasons:

Investment counselling fees relate to the annuitant's responsibilities in respect of self-directed RRSPs.

	                     	971094
XXXXXXXXXX	                         M.P. Sarazin

Attention: XXXXXXXXXX

August 12, 1997

Dear Sirs:

Re: Investment Counsel Fees and RRSPs

This is in reply to your letter dated April 21, 1997, wherein you requested our opinion as to whether fees paid by an individual for general investment counsel services including investment strategies with respect to his or her self-directed registered retirement savings plan ("RRSP") would be considered a premium paid to the plan.

Investment counselling fees for advice relate to the expense incurred to obtain an investment strategy regarding the specific investments of a particular portfolio from a person whose business it is to render such a service.

Based on the arrangements we have seen to date, where an annuitant sets up a self-directed RRSP trust, the trust agreement entered into by the annuitant and the trustee provides that the trustee of the RRSP takes direction from the annuitant regarding the purchase and sale of investments in the RRSP. In these situations, the investment strategy and decisions are the responsibility of the annuitant and, where an expense is incurred for investment counselling fees related to such strategy and decisions, it is the Department's position that such fees are the obligation of the annuitant and not of the RRSP trust. This would be the case whether the investment counsel advice is provided to the annuitant or, with the annuitant's approval, directly to the RRSP trustee. Where such fees are paid by the RRSP trust, we consider the annuitant to have received a benefit from the RRSP which must be included in income.

As the Department had previously taken the position that such fees are not deductible to the annuitant (per paragraph 4 of Interpretation Bulletin IT-124R6), new paragraph 18(1)(u) of the Income Tax Act only confirms this treatment.

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

Yours truly,

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