1 April 1993 Income Tax Severed Letter 9304685 - Pension Buyback

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.

                                           5-930468
XXXXXXXXXX                                 M.Shea-DesRosiers
                                           (613) 957-8953

April 1, 1993

Dear Madam:

Re: Pension Buyback

This is in reply to your letter of January 25, 1993 concerning the deductibility of contributions made for past service.

The rules for employee contributions to Registered Pension Plans(RPP) are to be found in subsection 147.2(4) of the Income Tax Act (the "Act"). Paragraphs 147.2(4)(b) and (c) of the Act apply to past service contributions relating to years before 1990 during which an employee was not a contributor (paragraph (b) and while he/she was a contributor (paragraph (c)).

The deductions permitted under paragraph 147.2(4)(b) of the Act is equal to the least of:

     (i)  the total past service contributions made in the
          year or a previous year in relation to eligible
          years while the taxpayer was not a contributor,
          less amounts previously deducted.

(ii) $3,500

     (iii) $3,500 times the number of years of eligible
          service while the taxpayer was not a contributor
          less amounts previously deducted.

The deduction permitted under paragraph 147.2(4)(c) of the Act is equal to the lesser of:

     (i)  the total past services contributions made in the
          year or a previous year in relation to eligible
          years while the taxpayer was a contributor, less
          amounts previously deducted, and 

     (ii) $3,500 less amounts deducted under paragraphs
          147.2(4)(a) and (b).

There is no limit on the carryforward of past service contributions deductible under paragraphs 147.2(4)(b) and (c) of the Act.

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

Yours truly,

for Director Financial Industries Division Rulings Directorate