25 August 1994 External T.I. 9420645 - AMOUNT OF 146(8.2) DEDUCTION

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:

What is the amount of the deduction and income inclusion under 146(8.2) and 146(8) respectively where the fair market value of the property in the RRSP is less than the amount of the undeducted premium(s) paid to the RRSP.

Position TAKEN:

The amount deducted and brought into income cannot exceed the fair market value of the property in the RRSP.

Reasons FOR POSITION TAKEN:

Wording of 146(8.2) and 146(8).

		Patricia Spice
XXXXXXXXXX	942064

Attention: XXXXXXXXXX

August 25, 1994

Dear Sirs:

Re: Deduction for a Refund of an Undeducted Premium
Pursuant to subsection 146(8.2) of the Income Tax Act (the "Act")

This is in reply to your facsimile transmission of August 11, 1994, in which you ask us to confirm the amount which must be certified on a Form T3012 ("Application for Refund of RRSP Excess Contributions Made In 19 ") in respect of the above-noted refund from a registered retirement savings plan (RRSP).

The situation you describe involves a premium paid to an RRSP in the amount of $1000 and a later receipt of a payment in respect of the undeducted premium to the RRSP which, after sales charges and a withdrawal fee, amounts to $950. We point out that your concern could also relate to the refund of a premium paid to an RRSP where the balance in the RRSP is less than the premium because of a decrease in the fair market value of the investments purchased with the premium.

Where the balance in the RRSP is less than the amount of the undeducted premiums made to the plan, the certification by the issuer in Area V of Form T3012 cannot relate to an amount in excess of the balance in the plan. The T4RSP to be issued to the annuitant in respect of the refund of undeducted premiums must be an amount equal to the amount certified in Area V of the plan.

The deduction under subsection 146(8.2) of the Act can only be taken with respect to a payment received out of the RRSP. Although the payment must be "in respect of" the undeducted premiums (i.e., the actual cash deposit or the fair market value of the property purchased with the premium up to the amount of the premium), it is irrelevant that the undeducted premium to which the refund relates is in a greater amount. It is a condition of both paragraph 146(8.2)(d) and subsection 146(8) of the Act that the payment (or amount) received must be included in income and, therefore, the T4RSP must be issued in the amount of the value of the benefit received out of the RRSP.

Although the foregoing comments are an expression of opinion only and are not binding on the Department, we trust they are helpful.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch