Roy – Tax Court of Canada finds that CRA could not deny the carry-forward of excess RRSP contributions as an imposed quid pro quo for forgiving Part X.1 penalty tax
The taxpayer made a substantial overcontribution to his RRSP to fund investments that quickly became worthless. Accordingly, he was not in a position to withdraw the amount of the overcontributions to mitigate the corresponding Part X.1 penalty tax. CRA granted his application to waive that tax under s. 204.1(4). However, it thought that it was fair to also deny him any further deductions of the over-contributed amount in future years as he gradually earned income in those years to utilize the excess. Accordingly, it denied RRSP deductions taken by him in those subsequent years.
Smith J, in allowing the claimed RRSP deductions, stated:
…[T]he Respondent has failed to point to any legislative provision that would allow the Minister to eliminate unused RRSP contributions on the basis that they represent excess contributions.
Moreover … the Court does not make decisions on the basis of fairness ... .
Neal Armstrong. Summary of Roy v. The Queen, 2019 TCC 50 under s. 204.2(1.2).