23 November 1989 Income Tax Severed Letter ACC8967 F - Initial Circulation of 1989 Pension and RRSP Tax Guide

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.

In accordance with your request of November 20, 1989 we have reviewed the above-noted Guide.

Our comments in the attached appendix are based on the provision of the Income Tax Act as proposed to be amended by Bill C-28 (first reading, June 20, 1989) and the draft Notice of Ways and Means Motion dated 13-9-89 dealing with pension reform. Unless otherwise indicated, the references to sections, subsections, etc., are to the Income Tax Act.

If you have any questions, please contact us.

APPENDIX 1989 PENSION AND RRSP TAX GUIDE INITIAL CIRCULATION

CHAPTER 1

Transfer of lump sum payments

1. We note that the Guide does not address the RRP lump sum payments to a testamentary trust referred to in subsection 104(27). We press this to be intentional.

Transfer of a retiring allowance to an RPP

2. First paragraph after the Tax Tip on page 14. We observe that the $2,000 per year limit also applies to employment years with a person related to the employer paying the retiring allowance. See clause 60(j.1)(ii)(A).

Undeducted AVCs

3. The first bullet on page 17 does not adequately cover the amounts referred to in paragraph 56(1)(d.2) which include both payments out of or under the relevant annuity as well as the proceeds of disposition of the annuity. We suggest the following rewording: "amounts in respect of annuities the payments for which either involved RRSP or RRIF transfers or were deductible from income as RRSP contributions."

CHAPTER 2

Transfer of lump sum payments

4. Fourth paragraph on page 19. While the Guide correctly refers to the cost amount of the shares used in the election under subsection 147(10.1), it neglects to identify whose cost amount. We suggest specifying that the cost amount is that to the DPSP

5. First paragraph on page 20. Although the Guide refers to the situation where the DPSP member dies, it neglects to discuss the tax consequences of payments to a testamentary trust as provided in subsection 104(27.1). We presume this to be intentional, although coverage of subsection 104(27.1) situations would make the Guide more complete.

CHAPTER 3

Who can invest in an RRSP and when?

6. (Page 21). There is the incorrect suggestion that RRSPs mature only after the end of the year in which the annuitant becomes 71, thus allowing a taxpayer to make contributions up to the end of age 71. In fact, contributions cannot be made after maturity of the particular RRSP, pursuant to paragraph 146(2)(b.3), and maturity can occur earlier than the end of the year in which the annuitant reaches 71 years of age, although the end of such year is the latest possible maturity date per paragraph 146(2)(b.4). We suggest that both the flexibility concerning the maturity date of an RRSP and the inability to make contributions after maturity be specifically addressed in next year's revision of the Guide (if not this year's).

Calculation of earned income (chart)

7. (a) Line (1). As previously indicated, the line (1) amount may be overstated by employment related deductions not mentioned in the chart but reported at line 232 of the T1 return (e.g., deductions under paragraphs 8(1)(b), (n) and (o)).

(b) The last bullet of the Note on page 24 should exclude property income from the rental of real property.

Excess Contributions

8. (Page 27). Contrary to what is stated in the Guide, excess RRSP contributions eligible for deduction from income under subsection 146(8.2) may be withdrawn without tax withholding at source even if form T3012 is not completed. See subsections 100(1) (definition of "remuneration") and 103(6) (definition of "lump sum payment") of the Regulations.

Transfer of a refund of premiums under an RRSP

9. (Page 31). While the second paragraph deals with transfers of refund of premiums received by a spouse of the deceased annuitant, it neglects to deal with transfers by a child or grandchild of the deceased notwithstanding the fact that the first paragraph specifically indicates that a child or grandchild may receive refund of premiums.

Spousal RRSPs

10. (Page 35), fourth paragraph. As previously indicated, in describing the situations that do not trigger the attribution rule in subsection 146(8.3) the Guide neglects to address the exception referred to in paragraph 146(8.7(c) (i.e., amount received under a plan that became deregistered on or before May 25, 1976).