Date: 20010517
Docket: A-817-99
Neutral citation: 2001 FCA 157
CORAM: DESJARDINS J.A.
LINDEN J.A.
MALONE J.A.
BETWEEN:
PAUL DANA RODRIGUE
Applicant
- and -
ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT
LINDEN J.A.
The issue on this application is whether the 1995 contribution of a Canadian taxpayer to a pension plan in the United States under paragraph 401(k) of the United States Tax Code that is not registered by the Minister of National Revenue is deductible from the applicant's income for that year. The Tax Court Judge held that it could not be deducted and we must agree with that conclusion.
The law on this issue is clear. Only those deductions found in section 8 of the Income Tax Act[1] may be deducted from a taxpayer's income. Paragraph 8(1)(m) of the Act allows the deduction of contributions made to a Registered Pension Plan in accordance with subsection 147.2(4) of the Act.
A Registered Pension Plan is defined in the Act as one that has been registered by the Minister of National Revenue (subsection 248(1)). Unfortunately for the applicant, contributions to 401K plans in the U.S. are not automatically allowed; they must be registered by the Minister. This Plan was not so registered. The authorities, although noting the possible unfairness of the situation, are unanimous in denying the deduction in cases such as these: (see Bussey v. R., [1998] 2 C.T.C. 2470; Kamil v. R., [1999] 1 C.T.C. 2447; Brilla v. R., [1998] 2 C.T.C 2638).
The applicant argues that his case is different than the others because of paragraph 7 of Article XVIII, an amendment to the Tax Convention between the U.S. and Canada which reads:
| A natural person who is a citizen or resident of a Contracting State and a beneficiary of a trust, company, organization or other arrangement that is a resident of the other Contracting State, generally exempt from income taxation in that other State and operated exclusively to provide pension, retirement or employee benefits may elect to defer taxation in the first-mentioned State, under rules established by the competent authority of that State, with respect to any income accrued in the plan but not distributed by the plan, until such time as and to the extent that a distribution is made from the plan or any plan substituted therefor.
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Une personne physique qui est un citoyen ou un résident d'un État contractant et le bénéficiaire d'une fiducie, d'une société, d'une organisation ou d'un autre mécanisme qui est un résident de l'autre État contractant, qui est généralement exempt d'impôt sur le revenu dans cet autre État et qui est géré exclusivement aux fins de verser des prestations de pension ou de retraite ou d'autres prestations aux employés peut choisir de différer l'impôt dans le premier État, conformément aux règles établies par l'autorité compétente de cet État, à l'égard des revenus accumulés dans le régime mais non encore distribués, jusqu'au moment, et dans la mesure, où ces revenus sont distribués par ce régime ou par tout régime qui le remplacerait.
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He contends that the use of the words "income accrued" could include amounts contributed to the plan. In our view, this is not the case; these words are clearly meant to exempt only income earned on money in the plan, not contributions of capital made into the plan. Specific rules are contained in the Act to cover the treatment of such capital contributions.
The French version of these words - revenus accumulés - which are, of course, equally official, are of no assistance to the applicant. These words too, in their context and looked at as part of the Act as a whole, convey the same meaning as the English words.
In any event, the Convention allows deferral of income to be only "under rules established by the competent authority of that State", which rules have not been complied with in this case, as the plan has not been registered by the Minister.
Finally, the new provision of the Convention did not come into force in 1995. Paragraph 7 was ratified on November 9, 1995 and came into force on that day, but the language of the provision itself indicates that the date it actually came into operation was January 1, 1996. (See S.C. 1995, c. 34, Article 21, 2(a), to the effect that the protocol shall enter into force "on or after the first day of the second month next following the date on which the protocol enters into force", that is, November 9, 1995, see Canada Gazette Dec. 9, 1995, at p. 4172).
The application will, therefore, be dismissed, but without costs in the circumstances.
"A.M. Linden"
J.A.
"I agree
Alice Desjardins, J.A."
"I agree
B. Malone, J.A."
[1] R.S.C. 1985, c. 1 (5th Supp.)
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