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:
Budget proposals for excess rrsp contributions
Position TAKEN:
Routine review of budget provisions
Reasons FOR POSITION: Routine
XXXXXXXXXX 5-951203
Attention: XXXXXXXXXX
July 7, 1995
Dear Sir/Madam:
Re: RRSP Contributions
This is in reply to your letter of April 4, 1995 with respect to the timing of contributions to an RRSP.
The first issue in your letter concerns the determination of the date a contribution is made to an RRSP when it is sent to a financial institution by courier.
The Income Tax Act (the "Act") and Income Tax Regulations (the "Regulations") do not provide any rules with respect to the determination of when a contribution is made to an RRSP. Accordingly, the law in general or any other Provincial or Federal Act which may have application in a particular situation will apply to determine if and when a contribution is made. It is, however, our understanding that a contribution to an RRSP will generally not be considered to have been made until the financial institution to which an amount is sent accepts the amount as a contribution and that the designation of an amount as a contribution can be revoked by the contributor at any time before it is so accepted by the institution.
The second part of your letter concerns the application of the proposed amendments contained in the February 27, 1995 Federal Budget as they pertain to the reduction of the tolerance for excess contributions to an RRSP.
Since the legislation in respect of the proposed reduction of the $8,000 tolerance on excess RRSP contributions has not been released to date, we can not provide any specific comments on its application. However, our understanding of the proposal is that the tolerance will be reduced to $2,000 for the purpose of calculating taxes in respect of excess contributions after 1995. Nevertheless, a taxpayer who has excess contributions on February 26, 1995 in excess of $2,000, will be provided with an additional tolerance of up to $6,000 in respect of that excess. In that case, any excess contributions of up to $8,000 as of February 26, 1995 will not attract any taxation but any additional contributions made after that date will if they are not otherwise offset by RRSP contribution room in 1995 or not withdrawn before January 31 1996. In this respect, it should also be noted that the application of additional RRSP contribution room that becomes available in 1996 must first be applied to reduce any pre-budget excess contributions.
For example, if a taxpayer who has an $8,000 excess on February 26, 1995 contributes an additional $2,500 on February 28, 1995, he or she will be subject to tax on the $2,500 contribution beginning in 1996 if it is not otherwise offset by RRSP contribution room in 1995 or is not withdrawn before January 31, 1996. Contribution room arising in 1996 must first be applied to reduce the pre-budget excess but will not reduce the amount of the post budget excess subject to tax until the pre-budget excess is eliminated.
Deliberate over contributions to an RRSP will generally be taxed when they are withdrawn, even though they were not deducted in computing income. However, contributions may be withdrawn tax free in accordance with the provisions of subsection 146(8.2) of the Act if, at the time they were contributed, the taxpayer intended to leave them in the RRSP until its maturity. In this respect Revenue Canada will normally consider that a taxpayer did not intend to withdraw a contribution made on February 27, 1995.
We trust these comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
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