11 March 1994 External T.I. 9405615 - RRSP DEDUCTION LIMIT AND DEFINITION OF EARNED INCOME

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.

RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY

DOCUMENT TYPE:

Opinion

Principal Issues:

Calculation of individual's RRSP deduction limit.

Position TAKEN:

Provided general information and RRSP Guide.

Reasons FOR POSITION TAKEN:

LEGAL:

FINANCE OPINION:

JURISPRUDENCE:

RCT PUBLICATIONS:

1993 RRSP's and Other Registered Plans for Retirement Guide

HAA NUMBER:

7255-3

XXXXXXXXXX 940561

March 11, 1994

Dear XXXXXXXXXX:

Re: Contribution Limit for Registered Retirement Savings Plan (RRSP)

This is in reply to your letter of February 26, 1994, in which you ask us to determine the amount you can contribute to your or your spouse's RRSP for the 1994 taxation year.

Written confirmation of the tax implications for particular taxpayers are given by this directorate only where the transactions described are proposed and submitted as part of an advance income tax ruling request. Although the Directorate provides technical interpretations of the law, they are not provided with respect to actual fact situations. Such questions should be directed to your local district taxation office. We can provide the following general non-binding comments, however, for your assistance.

A tax deduction for contributions to your RRSP and to your spouse's RRSP is permitted within the limits set out in subsections 146(5) and (5.1), respectively, of the Income Tax Act (the "Act"). Assuming you were not a member of a registered pension plan in 1993 or 1994 and have no "unused RRSP deduction room" (see below), the maximum deduction for the 1994 taxation year for your total contributions in 1994 and in the first 60 days of 1995 is equal to:

the lesser of

1) $13,500, and

2) 18% of your "earned income" for the 1993 taxation year.

"Earned income" is defined in paragraph 146(1)(c) of the Act and refers generally to employment and business income earned in a period throughout which an individual was resident in Canada, and employment and business income earned in Canada while the individual was a non-resident. Amounts received as salary for employment outside Canada while you were a non-resident do not constitute "earned income"; investment income does not consitute "earned income" whether you are resident or not.

For further information, please refer to pages 20 to 22 of the enclosed 1993 RRSP's and Other Registered Plans for Retirement Guide on the topic of the 1994 RRSP deduction limit, page 17 for a description of "unused RRSP deduction room", and to Form T1023 (RRSP Deduction Limit - Calculation of Earned Income for 19__) which is inserted in the middle of the Guide. Information concerning contributions to your spouse's RRSP is set out on pages 30 to 32 of the Guide.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate