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 a trust to fund lifetime retirement income funds can escape RCA rules if employer delays taking deduction for contributions.
Position TAKEN:
No.
Reasons FOR POSITION TAKEN:
If it's an RCA, timing of deduction cannot alter the fact.
XXXXXXXXXX 940874
Attention: XXXXXXXXXX
April 15, 1994
Dear Sirs:
Re: Settlement of Trust to Fund Lifetime Retirement Payments
This is in reply to your letter of March 7, 1994, in which you ask whether the above-referenced trust would be a "retirement compensation arrangement" (RCA) within the meaning of subsection 248(1) of the Income Tax Act (unless as otherwise stated all references to this statute are to the Income Tax Act S.C. 1970-71-72, c. 63 as amended, consolidated to June 10, 1993 - the "Act"). You suggest that if the employer does not take a deduction in the year the contributions to the trust are made, but rather delays the deduction to the year the payments are made out of the trust to the employee, that the RCA refundable tax would seem to be unwarranted.
The trust described by you clearly fits the definition of an RCA as contained in subsection 248(1) of the Act and would be subject, therefore, to Part XI.3 tax. The nature of the arrangement cannot be altered by merely choosing to delay the claiming of the deduction; indeed, if the deduction for an employer contribution to an RCA is not claimed for the taxation year in which the contribution is made in accordance with paragraphs 18(1)(o.2) and 20(1)(r) of the Act, then no deduction will be permitted.
Although the foregoing comments are an expression of opinion only and are not binding on the Department, we trust they explain our views satisfactorily.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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