29 October 1997 External T.I. 9725005 - ERRONEOUS ADVICE, RETROACTIVE CORRECTION

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:

Would an election under section 17 of the Public Service Superannuation Regulations constitute an agreement in writing for the purposes of paragraph 147.2(4)(b)?

Position:

No

Reasons:

The Act does not provide for the retroactive creation of an agreement where erroneous advice previously provided.

                                      	972500
XXXXXXXXXX		                            M.P. Sarazin

October 29, 1997

Dear Sir:

Re: RPP Past Service Contributions

This is in reply to your letter dated September 9, 1997, wherein you requested written confirmation that an election under section 17 of the Public Service Superannuation Regulations (the "PSSR") with respect to erroneous advice provided in 1979 would constitute an agreement in writing for the purposes of paragraph 147.2(4)(b) of the Income Tax Act (the "Act"). Where an individual has a period of service that was eligible to be counted under the Public Service Superannuation Act (the "PSSA") but, as a result of erroneous advice received from a person in the Public Service whose ordinary duties include the giving of advice, the individual failed to elect within the time prescribed under the PSSA, section 17 of the PSSR allows the individual to elect to have previous service count for the purposes of the PSSA and such election is deemed to have been made within the appropriate time prescribed in the PSSA.

Comments

It appears that the interpretation you seek relates to proposed transactions to be undertaken by a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996 by Revenue Canada. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can provide you with the following comments.

Interpretation Bulletin IT-167R6 titled "Registered Pension Plans - Employee's Contributions" provides the Department's views with respect to the deductibility of contributions to a registered pension plan including the deductibility of any interest costs related thereto.

Paragraphs 5 and 6 of IT-167R6 deal specifically with the deductibility of contributions for past services before 1990 where such contributions were made after March 28, 1988 under an agreement in writing entered into before that date. There is no provision in the Act that deems any election under section 17 of the PSSR to have created an agreement in writing entered into on the date that the erroneous information was provided to the individual. Consequently, we are of the view that there is no agreement in writing entered into before March 28, 1988 for the purposes of paragraph 147.2(4)(b) of the Act.

Paragraphs 15 and 16 of IT-167R6 deal with the deductibility of accrued and instalment interest in respect of contributions for past services. In this regard, the election under section 17 of the PSSR which has not yet been made would not constitute an agreement entered into before November 13, 1981. Consequently, the full amount contributed for past services would be considered pension contributions for purposes of the Act.

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