23 November 1994 External T.I. 9429215 - UNDEDUCTED RRSP PREMIUMS V. DEDUCTION OF RRSP PREMIUMS

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 reduction in "undeducted RRSP premiums" reduces amount available for deduction under 146(5) of the Act.

Position TAKEN:

No.

Reasons FOR POSITION TAKEN:

Formula in 204.2(1.2) is relevant only for purposes of Part X.1 tax and has no impact on 146(5) deduction.

XXXXXXXXXX		942921

November 23, 1994

Dear XXXXXXXXXX:

Reference is made to a XXXXXXXXXX which purports to find a relationship between subsections 204.2(1.2) and 146(5) of the Income Tax Act (the "Act"). The XXXXXXXXXX referred to the "undeducted RRSP premiums" formula in subsection 204.2(1.2) of the Act and the impact of an over-contribution to a registered retirement savings plan (RRSP) by an annuitant who was turning 71 years of age in the year. The annuitant collapsed his RRSP and purchased a registered retirement income fund (RRIF) with the proceeds and in the following year he received the "minimum amount" (defined in subsection 146.3(1) of the Act) out of the RRIF. XXXXXXXXXX was concerned that the minimum amount received would not only reduce the amount of the annuitant's "undeducted RRSP premiums" but would also reduce the amount available for deduction pursuant to subsection 146(5) of the Act.

In our view, the "undeducted RRSP premiums" formula is relevant only for the purpose of the calculation of an individual's "cumulative excess amount" which is subject to tax under Part X.I of the Act. This is clear from the opening words to subsection 204.2(1.2) of the Act: "For the purposes of subsection (1.1)".

The deduction in subsection 146(5), on the other hand, relates to premiums paid to an RRSP after 1990 and on or before the 60th day after the end of the taxation year, which premiums, in accordance with subparagraph 146(5)(a)(i) of the Act, have not been deducted for a preceding taxation year. Although the "minimum amount" received out of the RRIF reduces the annuitant's "undeducted RRSP premiums", it is not an amount that is thereby "deducted...for a preceding taxation year". The amount which was over-contributed in the previous taxation year remains eligible, provided there is a large-enough "RRSP deduction limit" (defined in subsection 146(1) of the Act), for deduction under subsection 146(5) of the Act.

We trust that this satisfactorily explains our interpretation.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch