Hatt – Tax Court of Canada finds that a pension contribution which was only currently deductible from income could be carried forward as a non-capital loss

Although s. 111(9) limits the sources which can give rise to a non-capital loss of a non-resident, a loss from Canadian employment is not excluded. A non-resident who had nominal income from a Canadian job from which she was on leave but who generated a significant deduction under s. 147.2(4)(a) by using a retiring allowance (which was taxable under Part XIII rather than Part I) to contribute to her registered pension plan, thereby generated a non-capital loss for that year. After her return to Canada, she deducted this loss.

CRA was offended: s. 147.2(4) does not permit the carry-forward of RPP contributions, and this limitation was "frustrated" by permitting them to in effect be carried forward as non-capital losses.

In the laconic common law tradition, D’Arcy J did not launch into a speech on the primacy of ordinary meaning over unexpressed policy, and merely noted that the statutory words permitted the carryforward.

Although this situation is more common on the GST side, this case illustrates that if CRA gets the bit in its teeth, it may proceed to the Tax Court irrespective of the technical merits.

Neal Armstrong. Summary of Hatt v. The Queen, 2015 TCC 207 under s. 111(1)(a).