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: 1. Can an RESP be closed after the subscriber withdraws contributions and a nominal amount remains in the plan? 2. Will property be transferred from an RRSP to RRIF at its cost amount or fair market value? 3. Can an RESP hold CSBs?
Position: 1. Yes if terms of plan provides for an allowed payout. 2. FMV 3. Yes
Reasons: 1. Promoters do not want to retain responsibilities in respect of small amounts. 2. 206(4) is very clear. 3. CSBs are qualified investments
Annual RRSP Consultation Session
Question 1
Where a subscriber has withdrawn his or her contributions to an RESP as a refund of payments and, subsequent to the withdrawal, the promoter does not want to retain the small amount of cash held in the RESP, can the cash be paid out as an accumulated income payment?
Response
Under the terms of its registration, an RESP cannot allow for the payment of an accumulated income payment until all of the conditions described in subparagraphs 146.1(2)(d.1)(i) to (vi) of the Act are satisfied. Even though an RESP may only hold a small amount of cash after the payment of a refund of payments to the subscriber, these conditions still have to be satisfied before the RESP can make an accumulated income payment.
Under the terms of the plan's registration, the RESP can make a payment to designated educational institutions in Canada, to a trust in favour of designated educational institutions in Canada or to another RESP. Consequently, where a promoter does not want to retain a small amount of cash remaining after the refund of payments to the subscriber, the promoter should ensure that terms of the RESP provide for an automatic payout of a cash balance of less than a certain amount in one of the ways listed in the preceding sentence.
Question 2
Where property is transferred from an RRSP to a RRIF for the same annuitant, is the property acquired by the RRIF at its cost amount or at its fair market value for purposes of Part XI of the Act?
Response
The Department's position continues to be that the property is acquired by the RRIF trust at its fair market value. Until there is a change in the legislation, the provisions of subsection 206(4) clearly require this result. The matter has been brought to the attention of the Department of Finance.
Question 3
Where Canada Savings Bonds are held in the name of a minor, can the minor transfer or sell the CSBs to an RESP under which the minor's parents are the subscribers and the minor is the beneficiary?
Response
Any question relating to the transfer or sale of Canada Savings Bonds should be addressed to the Bank of Canada. We note that the sale or transfer would require a change in ownership because the RESP would have to be the registered owner of the Canada Savings Bond subsequent to the sale or transfer by the minor.
Where a minor transfers his or her Canada Savings Bonds to an RESP under which he or she is a beneficiary and his or her parents are the subscribers, the transfer would be considered a disposition for purposes of the Act. Consequently, the transfer would have to be at fair market value or the provisions of paragraph 69(1)(b) will apply to deem the minor to receive proceeds of disposition equal to fair market value. We have confirmed with officials of the Department of Human Resources Development Canada that contributions to an RESP by anyone other than the subscriber are not eligible for the Canada Education Savings Grant.
Prepared by: Mickey Sarazin
November 3, 1999
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1999
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1999
Email this Content