26 February 1990 External T.I. 59385 F - Deduction of Premiums under RRSPs

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.

February 26, 1990

Dear Sirs:

Re:  Registered Retirement Savings Plans (RRSPs) Deductibility of Premiums

This is in reply to your letter of January 5, 1990 in respect of the application of subsection 146(5) of the Income Tax Act (the "Act") and our prior comments thereon as provided in our reply of October 24, 1989 and our telephone conversation of December 1, 1989, 19(1) Harding).

In general, we confirm our position as stated in our prior reply. However, it has come to our attention that the refund provisions for excess contributions under the Manitoba Civil Service Superannuation Act do not operate in the manner we had presumed in our earlier reply in that refunds of excess contributions are not generally made in the year in which they arise.

Where an employee makes contributions after he or she has attained the maximum percentage pension but the contributions are refunded in the same year as they are made and are therefore not deducted under subsection 8(1) of the Act, it is our general view that the position set out in paragraph 7 of IT-124R5 will be applicable.

However, in your situation, 24(1)

In this event we draw your attention to clause 13(24) of Bill C-52 which provides, in part, that:

     "in its application to the 1987 to 1990 taxation years subsection 146(5) of (the Act) shall be read as follows:

      (5) There may be deducted in computing the income for the taxation year of a taxpayer....

     (a)  where the taxpayer was employed in the year and

     (i)  as a consequence thereof was a person who is or may become entitled to benefits under a pension fund or plan in respect of the taxpayer's office or employment in the year... an amount that, when added to the amount, if any, deductible under paragraph 8(1)(m) in computing the income of the taxpayer for the year, does not exceed the lesser of $3,500 and 20% of the taxpayer's earned income for the year,..."

In accordance with this proposal employees making contributions which are deductible under subsection 8(1) of the Act but refundable to them under the provisions of the Plan, will be subject to the lower RRSP contribution limit under subsection 146(5) of the Act.

We trust this reply will be satisfactory to your needs and apologize for any inconvenience our previous reply may have caused.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate