Donald Watkins v. Her Majesty the Queen (Informal Procedure), [1994] 1 CTC 2873

Kempo, J.T.C.C. (orally):—This informal procedure appeal concerns Mr. Watkins' 1992 taxation year. The issue here concerns his ability to deduct the amount of $6,000 as a premium under a Registered Retirement Savings Plan (“RRSP”) of which his spouse is the annuitant.

The relevant parts of paragraph 60(j.2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") which is the applicable provision in this case provides as follows:

60. [There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:]

(j.2) for taxation years ending after 1988 and before 1995, such part of the aggregate of all amounts. . .paid on a periodic basis out of or under a registered pension plan. . .and included, by reason of subsection 56(1), in computing the taxpayer’s income for the year as

(i) is designated by the taxpayer in the taxpayer's return of income under this Part for the year, and

(ii) does not exceed the least of

(A) $6,000,

(B) [not applicable here], and

(C) the aggregate of all amounts each of which is an amount paid by the taxpayer in the year or within 60 days after the end of the year as a premium (within the meaning assigned by subsection 146(1)) under a registered retirement savings plan under which the taxpayer's spouse is the annuitant (within the meaning assigned by subsection 146(1)), to the extent that the amount was not deducted in computing the taxpayer's income for a preceding taxation year. ....

[Emphasis added.]

By way of overview, paragraph 60(j.2) allows a taxpayer to transfer amounts of periodic income received from registered pension plans ("RPPs") to his or her spouse's RRSP to a maximum amount of $6,000 per year for the 1989 to 1994 taxation years.

The core facts of the case are that in February of 1991 Mr. Watkins purchased a spousal RRSP for $14,000 from the Royal Bank of Canada using funds received that year from his registered pension plan. In filing his return of income for 1991 he claimed a $6,000 spousal RRSP deduction supported by the Royal Bank’s receipt of $14,000. On filing his return of income for his 1992 taxation year, Mr. Watkins claimed a deduction of $6,000 in respect of a spousal RRSP contribution for that year. This premium payment is evidenced by the Royal Bank’s 1991 receipt of $14,000 out of which $6,000 had been previously designated for 1991.

In essence Mr. Watkins is seeking what is in effect a carryforward to 1992 of a purported excess contribution paid in 1991 in respect of the same spousal RRSP plan. He submits that this is permitted by paragraph 60(j.2) of the Act in that it recognizes and contemplates a five-year term within its opening words, and that within the words used in the last part of clause (C) it recognizes and contemplates the previous year’s situation. Thus, he argued, the normal or ordinary taxation year-by-year approach had been modified by paragraph 60(j.2) when read in its entirety. At the very least, he submitted, such an interpretation is possible as these words give rise to “ambiguity” which "exists if reasonable persons can find different meanings in a statute" to quote from Black’s Law Dictionary ("Black's") at page 79. Further, Black's, at page 80, provides that a latent ambiguity may exist "where the language employed is clear and intelligible and suggests but a single meaning, but some extrinsic fact or extraneous evidence creates a necessity for interpretation or a choice among two or more possible meanings Reverting back to page 79 of Black's, “ambiguity” is defined (and I am paraphrasing here) as doubtfulness, doubleness of meaning or duplicity, indistinctness or want of clearness.

Mr. Watkins testified that he inquired of Revenue Canada's tips line for advice and assistance and that he had also obtained and read the 1991 and 1992 Pension and RRSP Tax Guides at the appropriate and material times. He is a university educated man of obvious high intelligence and in my view is fully credible in all aspects of his factual testimony. He said if the information that he bad relied upon had made it obviously clear that each spousal RRSP contribution had to be paid in each year or within 60 days of the end of that year, he would have simply withheld the 1991 excess and paid the $6,000 in January of 1992. He said he called the tips line and checked the 1992 Guide in the spring of 1993 prior to the filing of his 1992 return.

I agree with Mr. Watkins’ observations that there is an ambiguity of a latent nature within paragraph 60(j.2). It appears this ambiguity was not particularly recognized nor specifically addressed in the guides that he had relied upon. I would disagree with him, however, that he is or would be entitled to relief on the basis of estoppel as that principle has been recognized; see for example Stickel v. M.N.R., [1972] C.T.C. 210, 72 D.T.C. 6178 (F.C.T.D.) at pages 218-19 (D.T.C. 6185), and Wollenberg v. M.N.R., [1984] C.T.C. 2043, 84 D.T.C. 1055 (T.C.C.) at page 2045 (D.T.C. 1057).

Mr. Watkins invoked section 11 of the Interpretation Act of Canada, R.S.C. 1985, c. I-21, in support of a remedial approach to be brought to the interpretation of paragraph 60(j.2) to best ensure the attainment of its object and purpose according to its true intent, meaning and spirit. He urged that any doubts should be resolved in his favour, citing my own comments made in that regard in United Equities Ltd. v. M.N.R., [1989] 2 C.T.C. 2171, 89 D.T.C. 391 (T.C.C.) at page 2174 (D.T.C. 394). Apparently the parties here were unaware that this decision was reversed by the Federal Court-Trial Division, reported at [1992] 2 C.T.C. 214, 92 D.T.C. 6572 at pages 224-25 (D.T.C. 6580). In any event, that case involved facts and statutory provisions of a nature and complexity not found in the case at bar.

In my view the latent ambiguity in paragraph 60(j.2) as described by Mr. Watkins is resolvable through an observation of all of the words appearing within the entire provision rather than in isolation. Put in another way, the words of that paragraph are to be viewed in its entire context. This provision is premised on deductibility of an amount in computing income for “a taxation year”, it is referable to beginning and ending fiscal time periods without employing express collative terminology, it envisages payment to a taxpayer and inclusion into income of amounts received from a RPP "for the year", the amount is to be designated "for the year" and that amount in any event cannot exceed "the lesser of “$6,000 or the amount as per clause (C). Clause (C), which is the crucial provision, speaks of an amount "paid". . . “in the year" or within 60 days thereafter to the extent that it had not been deducted "for a preceding taxation year".

I agree with Crown counsel that for Mr. Watkins that amount, under clause (C), is zero as he did not pay anything in 1992 but rather is seeking a transfer. A reading of paragraph 60(j.2) as a whole does not in my opinion lead to obviating the fiscal year-by-year rule, nor does it incorporate, expressly or by implication, any statutory fiction whereby an amount previously paid may be deemed or held to be paid subsequently. If Parliament had intended carry forwards of excess contributions to spousal RRSPs from one year to the next it could have easily and clearly done so in the same manner as expressly provided for in normal taxpayer RRSP situations. The fact that it had not clearly so provided augers against Mr. Watkins's submissions that it was done but in an ambiguous way which ought to be resolved in his favour.

Mr. Watkins has presented a diligent and excellently thought out presentation of his case and I commend him for his efforts. Regrettably, however, and for the reasons given, I do not agree with his conclusions. His appeal is to be dismissed.

Appeal dismissed.