27 January 2000 External T.I. 1999-0007255 - REGISTERED EDUCATION SAVINGS PLAN

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: Conditions for distribution of accumulated income payments from an RESP

Position: Cannot confirm the situation in the letter.

Reasons: We are not given enough facts and it is a factual determination whether 146.1(2)(d.1)(i) to (vi) are satisfied in a particular situation.

XXXXXXXXXX 						1999-000725
M. P. Baldwin
Attention:  XXXXXXXXXX 

January 28, 2000

Dear Sirs:

Re: Registered Education Savings Plans

This is reply to your letter of September 28, 1999 and our telephone conversation of January 24, 2000 (Baldwin/XXXXXXXXXX ) requesting clarification of the rules relating to registered education savings plans ("RESPs") and the condition for the payment of accumulated income payments ("AIPs").

For RESP contracts established or amended after 1997, payments may be made to subscribers in certain circumstances. An RESP may provide after 1997 for the payment of an AIP, which is defined in subsection 146.1(1) of the Act, and these payments are taxable to the recipient pursuant to subsection 146.1(7) of the Act. In addition, a 20% tax under Part X.5 of the Act will be charged on the amount of the AIP. The AIP or a portion thereof may be excluded from the taxes under Part X.5 where the amount is contributed to a registered retirement savings plan and is deducted under either subsection 146(5) or (5.1) of the Act.

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. With respect to the preamble in 146.1(2)(d.1) and in particular the term "... the plan allows an accumulated income payment at a particular time ....", would mean at the time the AIP is to be paid.

It is a question of fact whether all the conditions in subparagraphs 146.1(2)(d.1)(i) to (vi) of the Act have been satisfied. With respect to the situation in your letter, you advise that the beneficiary of the plan is over 21 years of age and is no longer pursuing post-secondary school. Your enquiry relates to the requirement in subparagraph 146.1(2)(d.1)(v) of the Act, namely, the requirement that the beneficiary has attained 21 years of age and is not, at the time the AIP is intended to be paid "eligible under the plan to receive an educational assistance payment ...".

We are unable to confirm that AIPs are permitted from the RESP as we cannot confirm that the beneficiary is no longer eligible under the plan to receive an educational assistance payment. Such a determination can only be made after a review of the RESP plan terms and an examination of the facts.

The above comments are an expression of opinion only and therefore are not binding on the Canada Customs and Revenue Agency. We trust however that they will be of assistance to you.

Yours truly,

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