25 February 1998 External T.I. E9732625 - OVER-CONTRIBUTIONS - NEGATIVE BALANCE

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 the Cumulative excess amount in respect of RRSPs be nil where the undeducted RRSP premiums is nil.

Position:

Yes.

Reasons:

Wording of subsection 204.2(1.1).

973262
XXXXXXXXXX Fouad Daaboul

Attention: XXXXXXXXXX

February 25, 1998

Dear Sirs:

Re: Part X.1 Tax in Respect of Over-Contributions to Deferred Income Plans

This is in reply to your letter of December 10, 1997, wherein you asked us to confirm that where the amount of the "undeducted RRSP premiums" under paragraph 204.2(1.1)(a) of the Income Tax Act (the "Act") is nil, the amount of the "cumulative excess amount" under subsection 204.2(1.1) of the Act is also nil.

According to the wording of subsection 204.2(1.1) of the Act, which states that "the cumulative excess amount ... is the amount, if any , by which (a) ... exceeds (b) ...", the result of this substraction equation should be greater than zero.

In our view, where the amount of paragraph 204.2(1.1)(a) of the Act is nil, the result of this equation can not be less than zero. Furthermore, where the amount of paragraph 204.2(1.1)(b) of the Act, as determined by an algebraic formula, is a negative amount, section 257 of the Act will deem this amount to be nil.

We trust these comments will be of assistance.

Yours truly

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate