31 March 1995 External T.I. 9504855 - EARNED INCOME FOR RRSP

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:

Earned income for RRSP and fellowships

Position TAKEN:

Fellowship not earned income

Reasons FOR POSITION TAKEN:

Routine

		5-950485
XXXXXXXXXX	G. Martineau

March 31, 1995

Dear Sir:

Re: Registered Retirement Savings Plan (RRSP)

This is in reply to your letter of February 14, 1995 concerning the computation of earned income for RRSP purposes.

"Earned income" as defined in paragraph 146(1) of the Income Tax Act (the "Act") does not include amounts received by a taxpayer as or on account of a fellowship. However, it includes the amount of a grant received in a year to enable a taxpayer to carry on research or any similar work that exceeds the total of expenses incurred by the taxpayer for the purposes of carrying on the work. Paragraphs 10 and 11 of enclosed Interpretation Bulletin IT-75R3 give the criteria to determine if an amount is received as a fellowship or as a grant.

A tax deduction for contributions to your RRSP is permitted within the limits set out in subsection 146(5) of the Act. Assuming you were not a member of a registered pension plan in 1993 or 1994 and have no "unused RRSP deduction room", the maximum deduction for the 1994 taxation year for your total contributions in 1994 and in the first 60 days of 1995 is equal to:

the lesser of

1) $13,500, and

2) 18% of your "earned income" for the 1993

taxation year.

The deductibility of your RRSP contributions are not affected by your income earned in 1994 and you may deduct these contributions if you have earned income for 1993.

For further information, please refer to the 1994 RRSP Deduction Limit Chart (copy enclosed) which is inserted in the middle of the 1994 RRSP and Other Registered Plans for Retirement Guide that you may obtain at the Ottawa Tax Services Office located on 360 Lisgar Street.

We trust that the above comments are of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch