30 January 1997 Internal T.I. 964070A - DEDUCTION RRSP - JUDGES

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:

Deduction of RRSP - Judges

Position:

Application of the Act and 1996 Budget

Reasons: N/A

ADM'S OFFICE (3) ADM # 970148
PENDING COPY
RETURN TO 15TH FLOOR, ALBION TOWER

Signed on January 30, 1997

XXXXXXXXXX

Dear XXXXXXXXXX:

This is further to your letter of November 29, 1996 and our telephone conversation concerning the amount that a federal judge may deduct in respect of contributions to a registered retirement savings plan ("RRSP").

The Income Tax Act provides that a taxpayer's "RRSP deduction limit" will be equal to the taxpayer's "unused RRSP deduction room" at the end of the immediately preceding taxation year plus the amount by which the lesser of the "RRSP dollar limit" for the year and 18% of the taxpayer's "earned income" for the immediately preceding taxation year exceeds the aggregate of all amounts each of which is the taxpayer's pension adjustment for the immediately preceding taxation year in respect of an employer, or the prescribed amount in respect of the taxpayer for the year, less the taxpayer's net past service pension adjustment for the year.

Starting in 1991, the unused portion of the RRSP deduction limit for a year, called unused RRSP deduction room, is included in the RRSP deduction limit for the following year. Therefore, a taxpayer can carry forward the unused RRSP deduction room and use it for future years to deduct a larger amount of contributions.

The RRSP dollar limit for a calendar year, other than 1996, is the money purchase limit for the preceding year. For the 1996 year, the RRSP dollar limit is $13,500.

Further to the March 6, 1996 budget, a Notice of Ways and Means Motion was tabled by the Minister of Finance in December 1996 which proposes to modify, among others, the definition of money purchase limit for years subsequent to 1996. Following this amendment to the legislation, the money purchase limit and the RRSP dollar limit, for the following years, will be as follows:

Money Purchase Limit RRSP Dollar Limit

1995 $ 15,500 $ 14,500
1996-2002 13,500 13,500

Where a judge is in receipt of a salary under the Judges Act at any time in a particular year, there is prescribed, in respect of the judge for the immediately following year the amount, if any, by which the lesser of 18% of the salary received by the judge for the particular year as a judge and the money purchase limit for the particular year exceeds $1,000.

The general result of these rules was that for years prior to 1996, such judges were left with at least $ 1,000 worth of RRSP room. For 1996, because of the change to the 1996 RRSP dollar limit, in most cases the judges had nil RRSP room as demonstrated by Example II of our January 12, 1996 letter.

As well, the result of the budget proposals will also eliminate the minimum $ 1,000 RRSP deduction for most judges for the years 1997 to 2004 inclusive.

Assuming the March 6, 1996 budget proposal is adopted and provided there is no unused RRSP deduction room at the end of 1995, the RRSP deduction limit would therefore be nil for 1996 and the following years for an individual who has worked as a judge since the beginning of 1995. For an individual who was appointed a judge in 1996, no amount is prescribed for 1996. As a consequence, an amount should be available for a RRSP deduction in 1996 for such an individual. Since the regulation to implement the above proposal is not available yet, we cannot provide you at this time with specific examples as we used to. As soon as the regulation is available, we will provide you with a few examples.

I trust that the above information will be of assistance to you.

Yours sincerely,

Denis Lefebvre
Assistant Deputy Minister
Policy and Legislation Branch

L. Roy
957-8961
January 24, 1997
964070