XXXX F. Francis (613) 957-3498
January 29, 1988
Dear Sirs:
This is in reply to your letter of November 4, 1987 to the Surrey Taxation Centre, wherein you requested a technical interpretation on the application of paragraph 146(2)(c.4) of the Income Tax Act (the "Act") in the following two situations:
Situation 1
An institution offers the customer the ability to negotiate interest rates on a Registered Retirement Savings Plan (RRSP) in conjunction with non-registered funds.
Assuming that the normal rate on both RRSP and non-registered funds is 10%, the annuitant negotiates a rate of 5% on the RRSP and 15% on a similar amount of non-registered funds.
Situation 2
This situation is the converse of situation 1 in that the annuitant negotiates a rate of 15% on the RRSP and 5% on a similar amount of non-registered funds.
It is your position that while Situation 1 would cause an advantage to be extended to the annuitant of the RRSP under paragraph 146(2)(c.4) of the Act, Situation 2 would not be offensive since the annuitant would be receiving less interest on the non-registered funds.
It is our view that the right granted to an annuitant of an RRSP to negotiate interest rates on RRSPs and non-registered funds would be considered to be an advantage extended to the annuitant pursuant to paragraph 146(2)(c.4) of the Act. As a consequence thereof, the RRSP's contemplated in both situations 1 and 2 would be subject to deregistration under subsection 146(12) of the Act.
The above comments are an expression of opinion only and are not binding on the Department. They are, however, our best interpretation of the relevant legislation as it applies generally and we trust they are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate