24 October 1991 Income Tax Severed Letter

24(1)19(1)
                                             41956/2

                                             5-911869
                                             P. Spice
                                             (613) 957-8953
October 24, 1991

Dear Sirs:

Re: RRSP Incentives

We are writing in reply to your letter of July 2, 1991, concerning the offering of( 24(1) to RRSP purchasers and whether this would offend paragraph 146(2)(c.4) of the Income Tax Act (the "Act").

The situation you describe in your letter appears to relate to a specific proposed transaction and, accordingly, is properly the subject of an advance income tax ruling request submitted in accordance with the instructions contained in Information Circular 70-6R2.

Our general view on paragraph 146(2)(c.4) of the Act is that it prevents the registration of a plan which extends to an annuitant an advantage such as bonus interest, gifts, discounts on goods, chances at a prize, or other rights, things or properties of value. Advantages which remain in the plan are not considered to be granted to the annuitant and therefore do not contravene the provision. Issuers are subject to the penalty contained in subsection 146(13.1) if they offer such advantages to the annuitant or to a person who does not deal at arm's length with the annuitant.

Although these comments are not binding we trust they are helpful

Yours truly,

for Director Financial Industries Division Rulings Directorate

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