Bourguignon v. R., [1996] 2 CTC 2001 (Informal Procedure)

Lamarre J.T.C.C.: — This is an appeal under the informal procedure against an assessment issued by the Minister of National Revenue (hereinafter “the Minister”) in respect of the appellant’s 1990 taxation year. In computing his income, the appellant reported employment income of $144,000, which amount was received in 1990 as a retiring allowance pursuant to a judgment by the labour standards arbitration tribunal dated December 15, 1989. This amount was included in full in the appellant’s income for the 1990 taxation year in accordance with subparagraph 56(l)(a)(ii) of the Income Tax Act (the “Act”). In his appeal, the appellant petitioned this Court to allow him to average this income over three years or to grant him a refund of the tax paid thereon to a maximum of $24,000.

Facts

In order to make this assessment, the Minister took for granted the following facts stated in paragraph 12 of the reply to the notice of appeal:

(a) in a judgment rendered by arbitrator Pierre Cloutier on December 15, 1989, the labour standards arbitration tribunal granted the appellant a lump sump of $144,000 plus interest at the legal rate and the indemnity provided for in section 100.12 of the Labour Code computed from November 25, 1988;

(b) during the 1990 taxation year, the appellant received an amount of $144,000 as a taxable retiring allowance under the aforementioned judgment;

(c) during the periods granted by the Minister for making contributions to a Registered Retirement Savings Plan for the 1990 taxation year, no transfer of funds was made by the appellant under paragraph 60(j. 1 ) of the Income Tax Act (the “Act”).

[Translation.]

The appellant was the only witness to testify at the hearing and he admitted subparagraph (a) of the above-cited reply to the notice of appeal. It appears from the evidence that he had paid combined federal and provincial tax of $66,705 on his allowance. After receiving the net amount, the appellant apparently communicated with agents of the Minister on a number of occasions in order to determine whether he could contribute to a Registered Retirement Savings Plan (“RRSP”) in order to reduce his tax burden on that allowance. He said he received a series of negative answers within the time limit granted by the Act for making such a contribution. Having realized that the appellant had been given erroneous information by the various officials consulted, the Minister would appear to have finally authorized the appellant, by letter dated April 14, 1993, to contribute an amount of $133,000 to an RRSP, and to have considered it a valid transfer under paragraph 60(j. 1 ) of the Act for the purposes of making a deduction from his income for the 1990 taxation year. The Minister, however, required the taxpayer to make this contribution within 60 days following the date of that letter. The Minister further required that, in order to receive the deduction, the appellant forward an official RRSP receipt indicating the date of the contribution. Needless to say, by the time the Minister had realized his mistake, the appellant no longer had the cash to make such a contribution and was unable, within the time allowed, to find the necessary funds to satisfy the Minister, who moreover, in my view, arrogated to himself a power which he did not have under the Act.

Moreover, during 1994, the appellant transferred an amount of $66,615.81 from an RRSP that reached maturity during that same year to a locked-in retirement account, and then, on the date on which the appellant reached the age of 65, that is, November 28, 1994, to a life income fund. This transfer was made in accordance with the provisions of paragraphs 146(16)(a) and 146.3(2)(e) of the Act. The appellant would now like this Court to consider this transfer as a valid transfer under paragraph 60(j. 1) of the Act in order to be able to receive the deduction of which he had been unable to take advantage for his 1990 taxation year.

I cannot agree to the appellant’s request. The appellant cannot avail himself of the transfer made from his RRSP in 1994 to a life income fund and claim that he contributed again to another RRSP. The purpose of the transfer thus made was to partially shelter from tax the amount that had matured in his RRSP. The amount accumulated in that RRSP had already been subject to deductions from the appellant’s income in previous years and I find it hard to see how the appellant could use the transfer in order to obtain a new deduction. Moreover, paragraph 60(j. 1) of the Act provides entitlement to a deduction only in respect of the transfer of a retiring allowance received from an employer or of an amount paid under a retirement compensation arrangement to which the employer has contributed, if that sum is designated in the return of income for the year of the person to whom that amount was paid. The transfer made by the appellant from his RRSP to the life income fund is not contemplated by paragraph 60(j. 1 ).

As to the appellant’s request that he be allowed to average his income over a three-year period, I cannot agree to it either, since, in accordance with subparagraph 56(1 )(a)(ii) of the Act, it is the amount received by the appellant in the year that must be included in his income. The evidence is clear that the appellant received all of the retiring allowance, less income tax deducted at source, during the 1990 taxation year.

For these reasons, although I consider the Minister largely at fault in this deplorable situation, it is my view that the appellant received during 1990 a retiring allowance which was taxable under subparagraph 56( 1 )(a)(ii) of the Act, and that he cannot receive any deduction from that taxable amount since the provisions of the Act were not complied with in that no valid transfer was made to a registered pension plan or an RRSP within the time limit prescribed under paragraph 60(j. 1) of the Act.

The appeal is therefore dismissed.

Appeal dismissed.