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 Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether withdrawals from NISA fund No. 2 that are included in income under subsection 12(10.2) of the Act are included in the calculation of "investment income" for the purpose of determining the "cumulative net investment income" as these terms are defined in subsection 110.6(1) of the Act, and whether they would be included in the meaning of "earned income" as defined in paragraph 146(1)(c) and whether they are eligible for determining the amount of CPP contributions.
Position TAKEN:
They are included in the determination of "investment income" and "cumulative net investment loss". However they are not included in the definition of "earned income" or are they eligible as contributory earnings for CPP purposes.
Reasons FOR POSITION TAKEN:
Subsection 12(10.2) states that they are income from property, and the meaning of earned income does not include subsection 12(10.2) amounts.
940661
XXXXXXXXXX B. Kerr
Attention: XXXXXXXXXX
April 20, 1994
Dear Sir/Madam:
Re: Net Income Stabilization Account Withdrawals
This is in response to your letter of March 9, 1994, wherein you requested our opinion concerning the T1 reporting requirements for a farmer that makes withdrawals from his Net Income Stabilization Account ("NISA") Fund No. 2.
Specifically, you have asked if they should be reported on line 121 as "interest and other investment income" or on line 130 as "other income". In your opinion they should be reported on line 121 in order that they would be recognized in the calculation of a taxpayer's "investment income" and "cumulative net investment loss". If on the other hand they are reported on line 130 you would like to know if they would be considered eligible as "contributory earnings" for CPP contributions and as "earned income" for RRSP contributions.
Unless otherwise stated all references to statute are references to the Income Tax Act S.C. 1970-71-72, c.63 as amended consolidated to June 10, 1993 (the "Act").
In our opinion an amount determined by the formula referred to in subsection 12(10.2) of the Act in respect of NISA receipts would be included in computing the income of a taxpayer for a taxation year from a property. Any amount included in a taxpayer's income by virtue of subsection 12(10.2) of the Act would be included in the determination of the taxpayer's "Investment Income", which is relevant in the determination of the taxpayer's "Net Cumulative Investment Loss" within the meaning of these terms as defined in subsection 110.6(1) of the Act.
As stated on page 39 of the Farming Income Supplementary Guide, the amount shown in box 18 of the AGR-1 is to be reported on line 130 "Other Income" of the T1 Income Tax Return. It is our understanding that an amount in respect of NISA is shown in this box. The fact that this amount is reported on line 130 rather than line 121 of the return would not have any effect on the terms referred to above. In our view this amount in respect of NISA would be reported in key punch field 959 on the attached form T936(E) entitled "Calculation of Cumulative Net Investment Loss (CNIL) to December 31, 1993" in the calculation of a taxpayer's Investment Income for 1993.
In our view amounts included in a taxpayer's income by virtue of subsection 12(10.2) would not be considered "earned income" within the meaning of paragraph 146(1)(c) of the Act.
It is also our view that such NISA amounts would not be considered eligible contributory earnings in calculating Canada Pension Plan Contributions for the purposes of determining the deduction from tax payable under section 118.7 of the Act. In our view only pensionable earnings from employment, self-employed earnings which are generally business, professional, commission, farming or fishing income or the income from the types employment situations referred to on the attached form CPT20 entitled "Election to pay Canada Pension Plan Contribution under subsection 13(3) of the Canada Pension Plan" are eligible.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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