| 19(1) | File No. 5-9446 |
| D. Duff | |
| (613) 957-3498 |
February 15, 1990
Dear Sir:
This is in reply to your letter of January 17, 1990 24(1)
For plans to be accepted for registration as a RESP for purposes of the Income Tax Act (the Act), and to remain registered, a trust established under the plan must hold property for purposes specified in the Act. One of these purposes is to make educational assistance payments, which the Act defines as amounts to assist a beneficiary to further his education at the post-secondary school level. For a payment to qualify as an educational assistance payment, it is the Department's position that the beneficiary should be attending a post-secondary school when the payment is made.
If payments are made from the trust which are not in compliance with the requirements of the Act, registration of the plan may be revoked. if this occurs, the subscriber will be required to include in his income, for that year, the amount by which the fair market value of all the property of the trust exceeds the total of his net payments into the trust and the trust's pre-1972 income, if any.
Although only educational assistance payments can be made to beneficiaries, the Act allows for a refund of payments to be paid to the subscriber. A refund of payments is a refund to the subscriber of amounts he previously paid into the plan. These amounts are tax-free to the subscriber but individual plans may have certain restrictions on when or how they can be paid.
We trust that our comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate