Avoiding RRSP Fees For Transfers Out | Page 2 | RRSPs and RRIFs | Discussion forum

I don't know the specific answer to Bill's question but Bill what would you say about stock losses and fees within a RRSP? If I invest $100 in a stock and take a tax deduction (pre-tax money), and the stock price declines $30. Now I withdraw $70 and pay tax on it. What happened to the $30? Did I 'spend' it? Or is it just a loss. What if my stock trading fee was $10? Did I 'spend' that too?

I checked my records and can now confirm that the T4RSP that I rec'd from National Bank when closing down the account did not include the $100 fee for closing account which was taken out of the RSP immediately before closing it.
I am 99.9% sure that the same thing happened when I closed an RSP at HSBC and am not inclined to go look for it as I am quite sure.
Scotia has not yet issued its slip as it was done this year (LIRA).
I also closed an RIF at TD, but there was no fee for that.

I have no other business with National or HSBC, and received no other T slips from either. Given that National's was over $50, they would have to have sent a slip which included it if it were meant to be taxable income to me.

It may not make sense to you, Bill, but that's the way it is.

i think that what happens, effectively, is that the fee then becomes income to the FI, which is then taxed on it according to its own situation. I don't think it avoids the scrutiny of the tax man, just gets moved over to a different column.

Perhaps a comparison to MERs on mutual funds would fit. You never receive them, you do effectively pay for them, but you are not taxed on them. The money just stays with the FI. This would be consistent with James' concern. As many of you know, I am no longer a fan of RSPs, but James may have nailed one of the few reliable benefits.

This year I will ikely be closing another RIF, so we'll see what that brings. It may be no-fee though as I haven't decided yet how to arrange my withdrawal. I am closing them as fast as I reasonably can, in consideration of tax implications.

I don't have an Income Tax Act reference for this.

I do think it depends on how the stock trading commission or RRSP transfer fee is charged:

1. The commission/fee is charged to the RRSP before any deregistration.
2. A partial deregistration is done and the commission/fee is charged against the deregistered funds.

With #1, there's no withdrawal received by the annuitant to report on a T4RSP slip. With #2, there is.

I think financial institutions are aware of this and do #1.

As well, RRSP transfer fees and RRSP account fees are, in effect, deductible when paid directly by the RRSP. One deducted the RRSP contribution. The charged fees reduce the contributed funds and will never be withdrawn and added back to one's taxable income.

If the government allowed a deduction for RRSP fees paid directly by the annuitant, then that, in effect, increases their RRSP contribution room by the amount of such fees.

Section 146 of the Income Tax Act deals with RRSP's. I suspect there is something there!

Well, subsection 146 (8) makes certain payouts of an RRSP, called benefits, taxable to the annuitant:

Benefits taxable

146 (8) There shall be included in computing a taxpayer’s income for a taxation year the total of all amounts received by the taxpayer in the year as benefits out of or under registered retirement savings plans, other than excluded withdrawals (as defined in subsection 146.01(1) or 146.02(1)) of the taxpayer and amounts that are included under paragraph (12)(b) in computing the taxpayer’s income.

The definition of "benefits" is among the definitions in subsection 146 (1):

benefit includes any amount received out of or under a retirement savings plan other than

(a) the portion thereof received by a person other than the annuitant that can reasonably be regarded as part of the amount included in computing the income of an annuitant by virtue of subsections 146(8.8) and 146(8.9),

(b) an amount received by the person with whom the annuitant has the contract or arrangement described in the definition retirement savings plan in this subsection as a premium under the plan,

(b.1) an amount in respect of which the annuitant pays a tax under Part XI.01, unless the tax is waived, cancelled or refunded,

(c) an amount, or part thereof, received in respect of the income of the trust under the plan for a taxation year for which the trust was not exempt from tax by virtue of paragraph 146(4)(c), and

(c.1) a tax-paid amount described in paragraph (b) of the definition tax-paid amount in this subsection that relates to interest or another amount included in computing income otherwise than because of this section

and without restricting the generality of the foregoing includes any amount paid to an annuitant under the plan

(d) in accordance with the terms of the plan,

(e) resulting from an amendment to or modification of the plan, or

(f) resulting from the termination of the plan; (prestation)

My reading of all that is fees and commissions paid directly by an RRSP aren't "benefits" received or deemed to be received by the annuitant. Consequently, such payments are not taxable as an RRSP withdrawal for the annuitant under 146(8).

Top It Up said
All this was already covered off in layman's language, by the quote from Moneysense.ca, in post #20.  

No; they are quite different, as Bill said earlier (#21). I think you are making it more complicated, not less.

The Moneysense piece is about tax deductibility, which is no longer the issue, as we know fees are not deductible.

The current question is whether they are considered as part of total income when paid out, and the consistent answer is that they are not. Thus, the question about deductibility is not relevant.

All that the average person needs to know from this discussion is that they are not going to be taxed on the fees that the FI may charge for RSP/RIF transfers and close-outs.

Top It Up, you are confused. Your posts #31 and #20 deal with the deductibility of fees. Post #20 specifically refers to line 221 re deductions.

As we have indicated the topic here is not about the deductibility of fees, it's about whether these fees paid out of registered plan funds need to be included as income for income tax purposes, same as other withdrawals from registered retirement plans. That's what we were trying to figure out. What you've just cited from Norman1, particularly the second (last) sentence, confirms that such payments are not taxable (as income).

GR, there are a lot of FI's out there, and those who don't charge transfer out fees are proud to indicate that on their websites. Re your latter criterion, while some advertise they will reimburse many don't indicate they'll do so, but if you talk to them they will if your business is worth it to them, so it's not possible to get a definitive list of those who'll reimburse.

Unless you're transferring frequently or your balance is small I wouldn't obsess about fees, there are far more crucial total return considerations than a $150 transfer out fee on a $50K or more RRSP. You'll be drawing your money out of your RRIF for a while, doubt a few small fees along the way will have a noticeable impact on your quality of life over those 20 years or so.