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.
| 19(1) |
File No. 5-8960 |
| |
F. Francis |
| |
(613) 957-3496 |
November 14, 1989
Dear Sirs:
This is in reply to your letter of October 26, 1989 wherein you requested our comments in respect of the Department's revised position on the deductibility of the interest element of instalment payments made to a registered pension plan (RPP).
Commencing January 1, 1989, the total cost of buying back past service including the interest element will be considered a past service contribution to the RPP for purposes of paragraph 8(1)(m) of the Income Tax Act (the "Act") regardless of whether or not the interest payment is broken out separately form the total payment.
This revised position is applicable in respect of instalment payments to a RPP made after 1988 under a past service election entered into after November 12, 1981. For elections made before November 13, 1981, the instalment interest may be claimed as an other deduction or as a past service contribution.
Beginning in 1989, any previously non-deductible instalment interest paid to the RPP in 1988 and previous years on past service elections mad after November 12, 1981 will be considered as non-deductible pension contribution carried forward under subsection 8(8) of the Act and will be deductible in future years subject to the limit under paragraph 8(1)(m) of the Act.
Finally, it should be noted that taxpayers in receipt of pension income will be able, in 1989, to use paragraph 60(j) of the Act to deduct the excess of the total 1989 pension contribution over the amount deductible under paragraph 8(1)(m) of the Act to the extent that this additional deduction does not exceed the pension income in 1989. Under proposed pension reform, paragraph 60(j) of the Act will not be available for this purpose after 1989.
We trust that our comments are of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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