CRA finds that a departing U.S. resident who has a deemed inclusion for his IRA cannot then obtain a s. 60(j) deduction for contributing actual IRA withdrawals to his RRSP

A Canadian citizen who was a U.S. long term resident under the U.S. expatriation rules was deemed for Code purposes to receive a taxable distribution of his entire interest in his IRA (the “Deemed Distribution”) immediately before his relinquishing of his green card and returning to Canada. When he then made an actual withdrawal of those amounts (the “Withdrawal”) in order to contribute them to his RRSP, they were not subject to further U.S. income tax.

In policy terms, the RRSP contribution should have generated a s. 60(j) deduction – but did not. The Withdrawal did not qualify as an “eligible amount” for s. 60.01 purposes because it was the amount of the Deemed Distribution (not the Withdrawal) that was included in the indiviual's income under s. 56(12) and s. 56(1)(a)(i)(C.1). Conversely, the amount of the Deemed Distribution also was not an “eligible amount” as it was not a “payment received” for the purpose of s. 60.01.

This anomaly has been pointed out to Finance.

Neal Armstrong. Summary of 29 October 2018 External T.I. 2018-0750411E5 under s. 60.01.