All About Estates

RESP’s – A couple more wrinkles on EAP’s and AIP’s

In a recent blog, I wrote that the Canada Revenue Agency (“CRA”) was asked whether the six month extension for making educational assistance payments (“EAPs”) out of a registered education savings plan (“RESP”) under the appropriate subsection of the Income Tax Act (the “Act”) can apply when the beneficiary under the plan is deceased and the answer was no because according to the CRA “any payment “to or for an individual” must apply in respect of a living individual at time of payment.

In a recently released CRA bulletin, the CRA added another wrinkle so to speak to EAP’s. It notes that EAP’s for the first 13 weeks consecutive weeks of enrolment in a qualifying educational plan are limited to $5,000 according to the regulations. Administratively, however, the CRA will consider annual EAPS for longer enrollment to be acceptable provided the payments do not exceed $20,000, now indexed for inflation in 2016 for $22,794.

By the way, in another recently released technical interpretation by the CRA, in kind distributions from a RESP trust to a subscriber will constitute a disposition. The disposition will occur at fair market value at the time of disposition. At the time a plan is terminated, an in-kind distribution from the RESP may exceed a refund of contributions or payments. The remaining amount will be considered an accumulated income payment (“AIP”). As mentioned in my previous blog, in general AIPs are included in the recipient’s income in the year of receipt and are subject to an additional 20% tax (subject to certain available rollovers).

Thanks for reading.

About Steven Frye
Baker Tilly WM LLP is a leading, independent audit, tax, and business advisory firm based in Vancouver and Toronto, serving clients across Canada. Drawing on well-trained teams across a variety of disciplines, we ensure the alignment of our professional’s skills and experience with client requirements, resulting in exceptional service and business outcomes.