| 19(1) | File No. 5-8237 |
| W.C. Harding | |
| (613) 957-3499 |
June 27, 1989
Dear Sirs:
Re: Retirement Compensation Arrangements (RCAs)
This is in reply to your letter of June 12, 1989, wherein you requested our opinion with respect to the purchase of an annuity by an RCA.
When an RCA Trust acquires an annuity in its name it will be subject property of the Trust and the RCA will continue to exist. If the annuity is acquired in the name of the RCA beneficiary a benefit equal to the value of the annuity will be taxable under the provisions of paragraphs 56(1)(x) or (z) of the Income Tax Act.
In the latter case, the Refundable Tax would not be available to fund the annuity purchase but could be available, after the appropriate returns are filed and the refund received, to subsequently repay any liabilities arising from the annuity purchase. A T3RCA, however, could not be filed claiming a refund in anticipation of the purchase of the annuity.
We trust our comments are satisfactory to your needs.
Yours truly,
Wayne Douglasfor DirectorFinancial Industries DivisionRulings Directorate