CRA indicates that there is no relief where an RCA generates accrued interest on a stripped bond without any cash receipt to cover the refundable tax

CRA confirmed that where an RCA held a stripped bond, the accrued interest required to be recognized annually pursuant to Reg. 7000(2)(b) and s. 12(4) on an anniversary-date basis would ceteris paribus result in refundable tax that would be required to be paid for each year under s. s. 207.7(1) even though no cash was being generated to pay the tax. If a contribution was made to pay the tax, this would add to the amount of refundable tax (under s. 207.5(1) – refundable tax – (a)) to be paid, and if the contribution was later returned, it would be taxable under s. 56(1)(x) or (z).

Neal Armstrong. Summary of 4 June 2026 External T.I. 2023-0991701E5 under s. 207.5(1) – refundable tax.