28 April 1997 External T.I. 9706655 - 70 YEAR OLD, RRSP OVER CONTRIBUTION

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:

Can an individual who will turn 70 in 1997 contribute to an RRSP year and deduct the contribution in 1998 within the following year's rrsp limit?

Position:

Subject to over contribution penalties for the months in 1997, yes

Reasons:

Nothing in the Act to prevent the contribution or subsequent deduction.

XXXXXXXXXX 970665

April 28, 1997

Dear Sir:

Re: Deduction of RRSP Contributions

This is in reply to your letter of February 12, 1997 in which you requested a ruling concerning your eligibility to make a contribution to an RRSP in 1997.

Written confirmations of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3, dated December 30, 1996. Accordingly, we can not provide you with a ruling as you have requested. However, we can provide the following general comments which may be of assistance to you.

As you noted, an RRSP of a person who turns 70 years of age in 1997, must mature by December 31, 1997. Once matured it can not accept any further contributions. However, an individual is not precluded from deducting contributions made to an RRSP prior to its maturity after it has matured. Accordingly an individual 70 years of age in 1997, could contribute an amount to an RRSP in 1997, before the RRSP matured, and deduct it in 1998, provided the amount did not exceed the individual's RRSP deduction limit for 1998. Furthermore, since the RRSP deduction limit for 1998 is partially based on the individual's earned income for 1997, the individual will be able to utilize the income earned in the year of conversion to determine the final RRSP contribution deduction.

On the other hand, it should be noted that contributions made in 1997 in anticipation of being deducted in 1998 will likely be subject to tax under Part X.1 of the Income Tax Act on the excess contribution for a period of time in 1997. If an individual does not have any undeducted RRSP contributions prior to December 1997 and contributes an amount equal to the aggregate of the RRSP deduction limit for both 1997 and 1998 in December, 1997, the individual could claim the maximum allowable RRSP deduction in both 1997 and 1998. However, the individual would be subject to tax on the contributions for the following year for the month of December 1997, because it would be an excess contribution to the RRSP for that month.

An individual is also not precluded from making contributions to a spousal RRSP prior to its maturity but after the individual's own RRSP matures.

We trust the above comments will be of assistance to you.

Yours truly,

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