9 January 2002 Internal T.I. 2001-0114917 - STATUS INDIAN

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether a status Indian can claim a paragraph 60(e) deduction against other sources of taxable income, and, if so, whether it can increase a non-capital loss.

Position: No

Reasons: As per sections 3, 4 and 118.7 of the Act.

		January 9, 2002

	SASKATOON TAX SERVICES OFFICE	HEADQUARTERS
	Diane Bergen	Cornelis Rystenbil, CGA
	Individual Enquiries - Client Services 	Aboriginal Affairs Section
(613) 941-6547

		2001-011491

Status Indian - new paragraph 60(e) deduction

This is in reply to your facsimile of December 11, 2001, wherein you requested our views as to whether a status Indian that elects to pay Canada pension plan in respect of his or her exempt income may claim a deduction under paragraph 60(e) of the Income Tax Act (the "Act") against other sources of taxable income, and, if so, whether it can increase a non-capital loss.

Comments

A status Indian may elect to pay Canada pension plan premiums as a self-employed individual under subsection 13(3) of the Canada Pension Plan ("CPP") and section 29.1 of the CPP Regulations. A status Indian that elects to pay CPP premiums is entitled to claim a deduction under paragraph 60(e) of the Act for one-half of his or her CPP contributions paid in the year and is entitled to claim a tax credit under section 118.7 of the Act for the remaining portion of the CPP contributions.

Section 3 of the Act provides basic rules for determining a taxpayer's income for a taxation year for the purposes of Part I of the Act. Paragraphs 3(a) and (b) provide for the inclusion of the taxpayer's income from various sources. Paragraph 3(c) represents the amount by which the income under paragraphs 3(a) and 3(b) of the Act exceeds the deductions permitted by subdivision e of the Act. This amount will never be negative. Subsection 4(1) of the Act provides general rules for determining a taxpayer's income or loss from a particular source or from a source in a particular place. Except as provided by subsection 4(3) of the Act, subsection 4(2) provides that deductions permitted by sections 60 to 64 of the Act are not applicable to a particular source or to sources in a particular place. Consequently, a deduction allowed under paragraph 60(e) of the Act is not tied to a particular source or to sources in a particular place.

Subsection 111(8) of the Act defines the expression "non-capital loss" as the amount determined by the formula (A + B) - (D + D.1 + D.2). Amount A is defined as the amount determined by the formula E - F where E generally represents the taxpayer's loss for the year from an office, employment, business or property and F represents the amount determined under paragraph 3(c) of the Act in respect of the taxpayer. Therefore, the deductions described in subdivision e of the Act, including the deduction under paragraph 60(e), cannot create or increase the amount of a non-capital loss.

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Canada Customs and Revenue Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (613) 994-2898. A copy will be sent to you for delivery to the client.

Mickey Sarazin, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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